The San Francisco Employees’ Retirement System has made its first ever investment with Cerberus Real Estate Capital Management with a $100m (€88.6m) commitment into the Cerberus Institutional Real Estate Partners IV, according to a board meeting document received from the pension fund.
The commingled fund has a targeted capital raise of $1.5bn, with a hard cap of $2bn.
Cerberus has a planned first closing for Partners IV this month and targeted final close in December.
The real estate manager will be making a co-investment of 1.5% of the total commingled fund commitments up to $30m.
The overall investment strategy for the fund is to make distressed real estate investments including the purchase of non-performing loans.
Other strategies will include investing in commercial mortgage-backed securities and residential mortgage-backed securities.
The targeted returns for Partners IV are a 17-20% gross IRR and a 14-17% net IRR.
The transactions for the fund are projected to be split evenly between Western Europe and the US.
In Europe, the commingled fund will primarily leverage its long histories of dealing with European financial institutions to acquire non-performing loans (NPLs) with the aim of negotiating payoff resolutions.
Investing in European NPL portfolios has become Cerberus’s largest business segment, with more than $17bn of transactions since 2010, representing more than $31bn of unpaid principal balance.
San Francisco Employees believes the investment into Partners IV will give the pension fund more diversification in its real estate portfolio on a global basis and the chance for higher returns.
Previous to the commitment with Cerberus, the pension fund had a real estate portfolio made up of more than 50% core assets, and more than 80% of the portfolio was located in the US.
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