NORTH AMERICA – The Pennsylvania Public School Employees' Retirement System has approved commitments of up to $300m (€223m) into three real estate investment strategies.
One of these was a commitment of up to $100m into the Paramount Group Real Estate Fund VII.
The pension fund is projecting that it will achieve a net IRR of 10-14% and a 2x equity multiple for its investment.
The Paramount Group is looking at a total equity raise of $600m to $1bn, and there will be a total of 60% leverage placed on the fund.
Fund VII will be an office building only commingled fund looking to make value-added investments in trophy properties, assets that need re-tenanting or managing near-term lease rollover.
The fund will have a strong emphasis on assets in New York City. Other markets of interest will include San Francisco and Washington, D.C.
Pennsylvania Public School also approved a commitment of up to $100m into the Blackstone Real Estate Debt Strategies II.
The scheme expects the fund to target a 13% net IRR to the limited partners.
Nearly half of the total return for investors will be coming from current income.
The long-term goal for the debt investment fund is to generate attractive risk-adjusted returns by purchasing and/or originating performing loans backed by institutional-quality properties.
The structure of the investments will include B-notes, mezzanine debt, whole loans, participations, CMBS and preferred equity.
The Blackstone Group is the manager of the Debt Strategies II fund, for which it is seeking to raise $3bn.
Pennsylvania's other $100m investment was placed into private markets and real estate for its in-house co-investment and secondary market programme.
This capital will be used either to co-invest with other existing commingled funds on specific deals or buy out current limited partnership positions in commingled funds.