AEW returns to opportunistic fundraising in North America

The Boston-based manager has garnered a $100m commitment from the New Mexico State Investment Council for its 10th fund in the series.

AEW has begun raising capital for its 10th North American opportunistic real estate fund, AEW Partners Real Estate X, according to public pension documents published this week.

The Boston-headquartered firm is targeting a $2 billion fundraise, which would be the largest fund in the series by a significant margin. The ninth iteration of the fund closed on $1.2 billion in 2021, according to PERE data.

AEW has received a commitment of $100 million from the New Mexico State Investment Council, an increase of $25 million from its commitment to AEW Partners Real Estate Fund IX. The investor confirmed during its February 28 meeting that it would participate in the fund’s first close and consequently be entitled to discounted fees.

The firm has also received a $50 million commitment from the Public Employees’ Retirement System of Mississippi, the investor confirmed to PERE.

Other significant Fund IX investors include Maryland State Retirement and Pension System, Kansas Public Employees Retirement System and Ohio Police & Fire Pension Fund, according to PERE data.

The firm will continue its strategy of acquiring and developing assets across multiple property types, primarily focusing on multifamily in “near-urban” markets, bulk industrial properties in growth markets and traditional office-to-life-science conversions, according to a diligence document from consultant Townsend Group.

AEW will also focus on macro-led market dislocation opportunities, the document stated. Similar to Fund VI in the series, which was deployed post-global financial crisis, opportunities are likely to come from forced selling, rescue capital situations and bank loan sales, as well as from a general repricing. These opportunities are most likely to appear in the office, retail and hotel sectors, a spokesperson from Townsend said during the meeting.

“While distressed pricing may not be immediately available, the fund’s agile investment strategy is poised to benefit from tighter lending conditions,” the document stated.

The fund is overseen by senior portfolio manager Anthony Crooks, who has been with AEW for 26 years and has been involved in the last six offerings in the fund series. Crooks is supported by Allison Corter, head of fund operations, and Jonathan Watson and Steven Sechko, portfolio managers for the West and East Coast, respectively.

AEW targets a mid-teens net return for the fund series, typically only using between 55 and 60 percent leverage. Fund IX has currently produced a 4.4 percent net IRR for NMSIC, according to public documents, though is early in its life cycle. Fund VIII has so far produced a return for Kansas Public Employees Retirement System of 21.37 percent net IRR, per PERE data.