UNITED STATES - Pennsylvania Public School Employees Retirement System has approved new real estate commitments totaling $775m (€526.4m) in four commingled funds, including a $400m chunk with Beacon Capital.
Pennsylvania officials said they were impressed by the prior performance of Beacon's investments as commingled funds I, II and III realized net IRRs of 15%, then 47.4% and 49.1% respectively.
Pension fund officials believe the timing of its decision to invest in the Beacon Capital Strategic Partners VI fund commingled fund is good because the credit markets are working in its favour, given the low levels of capital available, and Beacon uses low leverage on its deals.
The commitment is being split so half of the capital will go directly into the fund and the remaining $200m will be used to make co-investments with other partners through the fund.
The Beacon move was ratified at the pension fund's 14 August board meeting, assisted by real estate consultant, Courtland Partners, as anticipated investor returns are 18-20% gross IRRs.
Fund VI has a value-added office building strategy to buy, develops and manages office assets in supply controlled markets but up to 50% of the fund could be invested outside the US, most likely in Western European markets such as London, Paris and Luxemburg, while around 10% of the ‘non-US' deals could be invested elsewhere.
The reamining commitments made by Pennsylvania Public School were $150m into Stockbridge Value Fund, $125m for Mesa West Real Estate Income Fund II and $100m for Cabot Industrial Value Fund III.