Asia real estate funds managed by LaSalle Investment Management and Blackstone have obtained $300 million in fresh commitments from a major US pension fund manager as US institutions continue to turn to Asian real estate strategies to meet their commitments to their members.
The Teachers’ Retirement System of Illinois (TRS) has pledged to invest up to $200 million to LaSalle in its LaSalle Asia Opportunity VI and another $100 million to Blackstone via its Real Estate Partners Asia III, the pension fund confirmed to Mingtiandi last Friday as it increases its investments across sectors, including Asian real estate funds.
Illinois’ TRS has been an active investor of funds managed by the two asset managers, with $620 million of its total $9.6 billion real assets portfolio handled by NYSE-listed Blackstone and some $6.9 million lodged in LaSalle’s vehicles.
Both US-based fund managers have ongoing fundraising activities, with LaSalle aiming to raise $1.5 billion via its sixth pan-Asia vehicle in the region while rival Blackstone just announced the first closing of its third Asia property fund last month, targeting $9 billion.
TRS said it is also pledging $60 million to a new real estate investment partner, Brasa Capital Management, based in Los Angeles. Brasa focuses on small- to mid-cap properties across the western US and Texas.
Based on its latest financial statement as of June 2020, TRS also employed two of LaSalle’s opportunistic funds in Asia with two accounts under LAO Funds III and IV, which closed in 2008 and 2014, respectively.
The pension fund also has six accounts with the Blackstone Real Estate Partners fund series, including two accounts in the first two Asian vehicles, as well as a pair of real estate holdings in the fund manager’s infrastructure fund.
Illinois’ teacher pension fund is the 42nd biggest pension system in the US, with total assets worth $63.7 billion, generating income to provide retirement, disability and survivor benefits to teachers and other public school personnel.
Aside from real estate investment firms, the TRS board of trustees also reviewed other planned investments worth $680 million to eight other investment firms for its private equity, income and diversifying strategies portfolios.
New partners include China-focused tech investment firm Sky9 Capital, which was pledged $35 million in fresh capital, along with New York’s Fundamental Advisors and Australia’s IFM Investors, which had $100 million in commitments each.
Pension Funds Provide Key Support
Aside from the boost TRS gave, Chicago-based LaSalle’s LAO VI fund also secured a $50 million commitment from the Arkansas Teacher Retirement System, supporting its goal to invest in a diversified and risk-adjusted portfolio of resilient assets. The fund aims to hit 18 percent in net internal rate of return (IRR) over an eight-year fund life.
This follows the $1.15 billion of fresh capital secured in 2018 by predecessor fund LAO V, which provided $3.3 billion in purchasing power for a wide pool of assets like office, retail, hotels and warehouses, resulting in a net IRR of 17 percent.
Blackstone’s third Asia real estate fund is scheduled to receive $100 million in backing from the Minnesota State Board of Investment, a public pension fund, according to a report by IPE Real Assets in August.
While the private equity giant has yet to reach a final closing on Real Estate Partners Asia III, the third vehicle has already raised 30 percent more capital than the second fund that was able to pool $7.1 billion in resources in 2018.
Global investment firms have been aggressive in raising capital for their Asia-focused funds this year. The APAC region witnessed a series of mega-fundraising activities last month, led by the $1.74 billion final closing by CBRE Investment Management for its Asia Value Partners VI fund, GLP’s first closing of its Japan Development Partners IV vehicle worth JPY 311 billion ($2.72 billion), and ESR raising an initial $750 million for its Japan Income Fund.