PSERS makes $275m in commitments

The $49.3 billion Pennsylvania Public Employees Retirement System has approved three new investments in opportunistic and value-added funds.

The Pennsylvania Public School Employees’ Retirement System (PSERS) has approved three new commitments totaling $275 million to existing real estate fund managers. At its December 9 board meeting, the $49.3 billion pension system approved a $100 million commitment to DRA Advisors’ Growth and Income Fund VIII, a $75 million commitment to Exeter Property Group’s Industrial Value Fund III and a $100 million commitment to The Blackstone Group’s Blackstone Real Estate Partners (BREP) Europe IV.
A presentation to the board by real estate consultant Courtland Partners cited DRA’s “wealth of investment experience” and “consistent value-added investment strategy” as reasons for committing to Fund VIII. According to pension documents, the vehicle will target a $1 billion to $1.35 billion fundraising for investments in a diversified portfolio of office, retail, multifamily and industrial properties across the US in distressed deals, portfolio deals, joint ventures with REITs and acquisitions in secondary markets. PSERS has a prior relationship with DRA, having invested $148 million in Fund VI in 2007 and $100 million in Fund VII in 2011. Courtland also noted DRA’s Pennsylvania presence for PSERS, as the firm currently owns 29 office properties in the state totaling 1.6 million square feet and valued at $260 million.
Meanwhile, Courtland’s presentation on Exeter’s Fund III detailed its strategy to “acquire, reposition, lease, develop, operate and sell industrial and business park assets in the major markets of the US and select Canadian markets (Vancouver, Calgary, Toronto).” Exeter is targeting $675 million in equity for the vehicle, which will make investments of $5 million to $20 million in big box warehouses, multi-tenant industrial and flex/suburban offices. The firm’s Plymouth Meeting, Pennsylvania headquarters was of note for PSERS, as well as the firm’s 14 current investments in the state. The pension also has invested with Exeter before, committing $75 million to Exeter Industrial Value Fund II in 2012. Courtland noted that the firm is using placement agent Hodes Weill & Associates to source potential international limited partners for the fund.
Finally, Courtland’s information on BREP Europe IV cited Blackstone’s “consistent team,” “consistent strategy,” “consistent investment process” and “ability to move in speed and scale to capitalize on larger fund size” as reasons for backing the firm. BREP Europe IV, which has a €5 billion hard cap, will invest in opportunistic real estate in “large, complicated situations where competition is limited,” according to the board documents. PSERS has a long history with Blackstone, having previously committed to BREP V, BREP VI, BREP VII, BREP Europe III and Blackstone Real Estate Debt Strategies II.
The three investments mark PSERS’ first real estate commitments since March, when the pension committed $75 million each to AREA Property Partners’ AREA Value Enhancement Fund VIII and Cabot Properties’ Cabot Industrial Value Fund IV.