GLOBAL – Texas Permanent School Fund is to make its second commitment to a European opportunistic real estate strategy this year, having approved $75m (€57.8m) for the AREA European Real Estate Fund IV.
The decision to back the opportunity fund managed AREA Property Partners follows a $40m commitment to the NIAM Nordic V real estate fund made in April this year.
The commitments will in time add to Texas Permanent's real estate exposure, which at $612m currently represents 6% of total assets and is below its target of 8%. Total commitments to real estate amount to $927m.
The latest commitment will help AREA Property Partners in its endeavours to reach a first closing for the fund before the end of the year and a final closing in December 2013.
The AREA fund will seek to capitalise on distress in major European commercial real estate markets by fixing broken capital and ownership structures, injecting capital and providing active management for distressed portfolios and funds. The fund aims to deliver core assets back into the market.
AREA will also seek to exploit pockets of growth, including selective development and refurbishments in prime areas with favourable supply-demand fundamentals.
The fund plans to build up a portfolio that will be weighted towards the UK (40%) and to a lesser extent Germany (20%), central Europe (20%) and France (10%).
The majority of assets (40-50%) will be in the retail sector, while office and residential assets will make up 20% each, and industrial 10%.
According to Texas Permanent's real estate consultant Courtland Partners, the fund is projected to achieve a 16-20% gross return.