By Muskan Arora
The $72.8
billion Pennsylvania Public School Employees’ Retirement System made a $300
million to Carlyle Realty Partners X.
Staff and consultant
Aksia will consider up to two new real estate fund recommendation to the board
this year.
The annual
pacing ranges from $800m to $1 billion, however the actual commitments for 2024
are expected to be below this range.
The system
will actively implement plans to get to the target allocation of 7% in the next
twelve months between dispositions and slower commitment pacing. Currently, the
RE sleeve allocates 8.3%.
“The fund will
acquire and develop 200 to 300 properties primarily in the US that overall
exhibit low correlation to GDP, high operating margins and high tenant
retention,” said Jarrett Richards, at the May meeting.
“The fund
will capitalize on three market opportunities including housing shortage, ageing
but healthy population in the US and technological disruption that's shifting
demand away from office and retail and toward industrial and residential
sectors,” added Richards, highlighting an expected net return to range from 13%
to 17%.
Following a
trend among mangers, Fund X may take on a bit less development risk and acquire
more existing properties to get the same level of return with slightly lower
risk.
To maintain a
balanced diversified portfolio among its opportunistic managers, the system has
made a slightly higher commitment to this manager as compared to its previous
two $200 million commitments to Carlyle.
“We also
can't ignore the debt financing environment for this fund is different from the
prior funds,” presented Richards to the board.
“The residential investments will likely be
financed by the agency lenders and the industrial assets are likely to be
lightly levered by lower cost of capital buyers are even folded into some of
the REITs who have financing advantages. Thus, I believe that this strategy
will be less affected by the availability of debt financing than many other
strategies in the market today,” he added.
