PSERS commits $300 million to RE

The Pennsylvania pension fund made follow-on commitments to industrial and debt funds, and added more money to its secondary and co-investment pool.

The Pennsylvania Public School Employees’ Retirement System (PSERS) wrote a number of checks to real estate firms at its monthly meeting Monday.

The pension fund committed up to $100 million to Philadelphia, Pennsylvania-based Exeter Property Group’s second core industrial fund, a follow-up from an earlier $75 million commitment. Using capital from Exeter Core Industrial Club Fund II, a $615 million vehicle from 2011, the firm plans to assemble a portfolio comprising about 75 percent bulk distribution facilities and 25 percent last-mile distribution facilities. The firm will buy fully-leased assets across 34 markets, with a minimum 93 percent occupancy, that have at least four-year leases, according to meeting materials.

PSERS also allocated $75 million at an earlier meeting to Exeter’s third fund, an $833 million vehicle, which has had a 7.1 percent net internal rate of return and a 1x multiple. The second fund has a net internal rate of return of 22.8 percent and a 1.5x multiple, according to meeting materials.

“Favorable supply-demand environment supports additional income growth, as trade and population growth continue to drive warehouse demand,” the pension fund wrote in a report recommending the second industrial fund. “Strong investor demand for diversified, income-producing portfolios of large scale continues to drive robust exits.”

Other investors in Exeter Core Industrial Club Fund II include investment firm Siguler Guff, which committed $64 million; the Ohio Police & Fire Pension Fund, which allocated $35 million; and Kansas Public Employees’ Retirement System, which committed $30 million, according to PERE Research & Analytics.

In addition to the Exeter commitment, the pension fund wrote a check to The Blackstone Group’s latest debt fund. PSERS committed $100 million to Blackstone Real Estate Debt Strategies III (BREDS III), a $4 billion vehicle.

The BREDS series at Blackstone was launched in 2008 and has originated or acquired over $30 billion in loans since then, according to PSERS’ documents. The third fund will primarily focus on mezzanine and structured lending on institutional quality real estate in well-located supply constrained markets on a global basis.

The pension fund’s documents also noted that the strategy generated 12 percent net returns with no realized losses since its 2008 inception. Other investors in the fund include the Illinois Municipal Retirement Fund, which allocated $100 million, and the Dallas/Fort Worth International Airport, which allocated $20 million, according to PERE Research & Analytics.

PSERS also allocated $100 million to its real estate secondary and co-investment program. The program has about $50 million left, and with a strong pipeline of investments, PSERS’ private markets and real estate director recommended the additional allocation.