The $51.2 billion Pennsylvania Public Employees Retirement System (PSERS) has voted to commit $100 million to the Blackstone Real Estate Debt Strategies (BREDS) Fund III and $350 million into a separate account with LBC Credit Partners, a Philadelphia-based mid-market lender.
BREDS’ third fund is seeking $4 billion, as PDI previously reported. The BREDS group 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. Michael Nash, senior managing director at Blackstone, leads the BREDS group. The investment was recommended to the PSERS board by senior portfolio manager William Stalter and Courtland Partners, PSERS’ real estate consultant.
The $350 million investment with LBC was recommended to the board by senior investment professional James del Gaudio and Portfolio Advisors, the pension’s private equity consultant. The investment will be structured as a separately managed account (SMA) and is being raised in tandem with the LBC Credit Partners IV fund. It is expected that the SMA will invest alongside Fund IV and future successor vehicles, said PSERS’ documents.
The PSERS’ account and Fund IV will originate and manage a diversified portfolio of secured mid-market loans to North American borrowers. LBC targets companies with revenues below $750 million and EBITDA of $5 million – $50 million. LBC provides transitional capital to fund acquisitions, refinancing, growth, recapitalizations and turnarounds on a sponsored or unsponsored basis. PSERS’ has invested in LBC’s prior funds and achieved strong returns on those. The pension’s investment in LBC’s second fund generated a 14.8 percent net IRR while the third fund returned 13.5 percent net IRR. John Brignola leads the Pennsylvania firm as managing partner.
In addition to these debt investments, PSERS also approved a $100 million commitment to the Exeter Core Industrial Club Fund II at its board meeting on 7 December. The real estate fund will build a portfolio of single-asset properties and small multi-building industrial property transactions. The facilities will be located within 34 major distribution markets across the US, said documents presented to the board by senior portfolio manager Laurann Stepp and Courtland.