The Pennsylvania Public School Employees' Retirement System recently resolved to commit a total of $225 million to three real estate funds. The $51 billion pension system approved contributions of $75 million each to 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 at its 9 March board meeting.
According to PSERS documents, the AG Core Plus Realty Fund III is a value-added real estate vehicle targeting $1 billion in equity commitments. The fund “will target high-quality, in-fill assets where sub-performance can be corrected and which are likely to appreciate over time.” In addition, with Fund III, Angelo, Gordon plans to “invest with local operating partners in high-quality office, retail, industrial and multifamily properties located primarily in the top 15 US markets.” In addition, up to 25 percent of the vehicle may be invested outside of North America.
Angelo Gordon’s core-plus fund has a target net return of 12 percent to 13 percent, with 6 percent to 7 percent of the total expected returns to be derived from income. AG Core Plus I currently has a net IRR of 18.2 percent, while Core Plus II currently has a net IRR of 3.3 percent.
Meanwhile, Exeter Industrial Value Fund II is a value-added vehicle targeting $425 million in commitments. Exeter Fund II “will acquire, reposition, lease, develop, operate and sell industrial and business park assets in the major markets of the Eastern, Central and Southern United States,” according to documents. Investments on behalf of Exeter Fund II will include big-box warehouses, multi-tenant industrial or regional warehouses and suburban offices. Exeter Fund II will target a net IRR of 13 percent to 14 percent, including 8 percent to 9 percent from income.
Finally, Bell Institutional Fund IV is a US value-added multifamily vehicle expected to raise $240 million in commitments. Through the fund, Bell Partners will acquire “well-located, quality apartment communities in the Mid-Atlantic, Southeast and Southwest.” Bell Fund IV will target a 12 percent to 14 percent net IRR, with an average 6 percent to 8 percent current return from income.
All three commitments represent PSERS’ first investments with these firms.