REAL ESTATE - The Pennsylvania Public School Employees Retirement System has approved investments in two commingled funds that could total $525m(€406m). The pension fund took this action at its recent board meeting
Pennsylvania Public School has okayed a commitment of up to $400m into the Blackstone Real Estate Partners VI fund. This investment will be equal to 25% of the committed capital of the investment fund.
The sponsor of the commingled fund is The Blackstone Group. It’s hoping for a total equity raise of $8bn. The company has committed to invest $100m of its own capital into the commingled fund.
One of the unique features of the fund is that it can co-invest on transactions with another Blackstone commingled fund, Blackstone Real Estate Partners International II. The pension fund believes this will give it an additional level of diversification.
There will be several investment themes for Real Estate Partners VI. One is to participate in some public to private real estate transactions. This could be with companies that own offices, hotels, retail and health care properties. Another is international assets. The commingled fund is allowed to place 10 to 20% of its equity in international deals. Markets being targeted would include Europe and Asia.
Pennsylvania Public School has approved an investment of up to $125m into the Madison Marquette Retail Enhancement Fund. This amount can’t exceed 25% of the committed capital for the fund. It’s been projected that investors in the fund will achieve a gross IRR of 18%.
The real estate manager of the commingled fund is Madison Marquette. The company and the commingled fund’s investment team will co-invest at least $60 million to the fund.
Madison Marquette is looking at raising $350m of equity for the fund. Leverage will not amount to more than 70% of the total portfolio cost.
The commingled fund will focus on investing in retail properties. This will be a mixture of existing assets and new developments. The target will be assets that are in in-fill locations. Some of the markets that it will be investing in include Los Angeles, San Francisco, Seattle, the Twin Cities, Washington DC, Philadelphia, New York-New Jersey and Southern Florida.
Madison Marquette will be pursuing a variety of strategies. Some will involve existing assets. These would be where the real estate manager will re-merchandize or revitalise a current property. There also would be the redevelopment an under-performing property.
New development will be part of the equation. This would involve just retail and mixed-use projects with retail and residential.