UNITED STATES - Pramerica Real Estate Investors has setup a new co-investment entity to invest in senior housing in the United Kingdom, to sit alongside its PRECO III commingled fund.

The SHIP UK II co-investment fund currently has $90m (€57.8m) in equity, of which $30m was committed by California Public Employees Retirement System (CalPERS).

CalPERS is expecting to achieve a net return on its investment of 16.9% and previously invested $100m in PRECO III.

The co-investment will made to a joint venture with Sunrise Senior Living - a JV signed in January 2007, according to Philip Barrett, a London-based principal at Pramerica.

"We knew that there would be some major pension funds that would have an interest in moving some capital into senior housing.  Our company also didn't want to have too much of our commingled fund tied up with one investment."

The joint venture requires PRECO III to fund 80% or $160m of the $200m of equity for the joint venture and Pramerica had a total equity raising of $700m on the fund.

Its investment strategy on the co-investment will be to use the capital to develop 18-23 assisted-living facilities in the UK.

The average age of the people living in these properties is said to be between 82 to 87, according to Barrett.

"We think there is a great deal of demand for new high-end assisted living product in the UK. This is why we are creating a new development program with Sunrise. And some of the markets we are looking at include Birmingham, Manchester, London and Glasgow in Scotland," he said.

Pramerica is still in the first year of its three-year investment process to find all of the developments for the Sunrise JV.

SHIP UK II is the first co-investment vehicle created for PRECO III but it will not be the last, Barrett added: "We are looking at some other co-investment deals for the commingled fund for the future."