The Texas Permanent School Fund has co-invested in the $2.3bn (€2.2bn) purchase of interests in 40 real estate funds from a “major public pension fund”.
The US institution declined to say whether the deal related to the recent sale of a $3bn portfolio of funds by the California Public Employees’ Retirement System (CalPERS).
The $50m co-investment, confirmed during a Texas Permanent board meeting, was made with Strategic Partners, a specialist Blackstone subsidiary.
Strategic Partners recently acquired interests in 43 funds from CalPERS, the largest-ever transaction of its kind.
Texas Permanent said the portfolio it co-invested in comprised 40 funds with approximately 400 underlying assets.
It said the projected return on the investment was roughly 20%, using leverage of 33%.
Texas Permanent has also approved a $75m allocation to a real estate debt fund managed by Mesa West, according to a board meeting document.
The investment in Mesa West Real Estate Income Fund IV follows previous investments with the manager, including Mesa West Real Estate Income Fund II, which produced a net return of 13%.
Mesa West is seeking to raise $750m for its latest fund and aiming to generate returns of 9-11%.
The fund will originate and service a portfolio of first mortgages.
Each of the properties in the fund must have a value-add component.
The loans are structured as floating-rate debt with a spread over LIBOR of 500-600 basis points.
Most of the loan-to-value ratios for the commingled fund portfolio will be in the range of 65% to 70%.
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