PSERS commits $200m to Brookfield

The $51 billion pension plan has resolved to contribute to the Toronto-based firm’s first global opportunistic real estate fund, Brookfield Strategic Real Estate Partners, which already has held a first close on $2.1 billion.

The Pennsylvania Public School Employees’ Retirement System (PSERS) has resolved to contribute to Brookfield Asset Management’s latest global opportunistic real estate vehicle. Documents from the $51 billion state pension plan reveal that its board has approved a commitment of $200 million to Brookfield Strategic Real Estate Partners, based on the recommendation of its consultant Courtland Partners. 

Brookfield is seeking $3.5 billion in equity commitments for its first global real estate opportunity fund, which will target “direct property, equity positions in real estate companies, distressed debt, recapitalisations, toe-hold positions in debt and equity securities and control-oriented loan originations” in North America and Europe, and selectively in Brazil and Australia, PSERS documents stated. The fund also may pursue certain development and redevelopment opportunities. 

“It is anticipated that the fund will have approximately 60 percent of its investments in the US, with the remaining 40 percent of its investments in Western Europe, Brazil and Australia,” documents added. 

As PERE reported in May, prior to this commitment from PSERS, the Toronto-based asset manager captured $2.1 billion in commitments for the first close of Brookfield Strategic Real Estate Partners. Brookfield Property Partners, the spinoff real estate business that Brookfield plans to take public later this year, contributed about half of the capital raised – $1 billion – in the first close. 

Though PSERS did not contribute to the fund’s first close, Brookfield is offering fee breaks on a sliding scale and based on the amount of capital an investor committed to the fund, beginning around the $200 million mark. Large investors committing $200 million or more to the fund will receive priority rights for future co-investments, for which Brookfield plans to raise capital on a deal-by-deal basis. With priority rights, such investors are given first choice for participating in co-investment deals, with their proportionate share of the deal based on how much capital they contributed to the overall pool of capital committed by large investors.

Brookfield Strategic Real Estate Partners marks the first significant real estate fundraising for the alternative asset manager since it collected $5.5 billion for its ground-breaking club fund, Real Estate Turnaround Consortium, in 2009. The new fund, which is targeting a gross internal rate of return of 20 percent, has not made any investments to date.

Separately, PSERS resolved in March to commit $75 million each to three real estate funds: Angelo, Gordon & Co.’s AG Core Plus Realty Fund III, Exeter Property Group’s Exeter Industrial Value Fund II and Bell Partners’ Bell Institutional Fund IV. The state pension also contributed $300 million to The Blackstone Group’s Blackstone Real Estate Partners VII and $200 million to The Carlyle Group’s Carlyle Realty Partners VI last year.