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CalSTRS CIO: US RE is ‘priced to perfection’

The chief investment officer of the California State Teachers’ Retirement System said the pension system is looking to buy real estate in Europe, not in the US.

The California State Teachers’ Retirement System is selling US assets and buying European properties, said chief investment officer Christopher Ailman.

The $178.7 billion pension system, which manages about $25.8 billion in real estate, according to its website, is looking overseas for less-heated markets, Ailman told Bloomberg TV last week.

“We think right now US real estate is priced to perfection,” he said. “The only place to make money in real estate right now is to build up to core and then sell it…Europe looks actually pretty reasonable and pretty inexpensive compared to the USA.”

CalSTRS’ most recent publicly-disclosed transaction was the March sale of a 262-acre commercial development site in Joliet, Illinois. The pension plan sold the property with First Industrial Realty Trust for $4.4 million to Ketone Acquisitions, according to real estate data provider Real Capital Analytics.

Despite Ailman’s comments about better opportunities abroad, CalSTRS, the country’s second-largest pension fund, has looked locally for its most recent real estate commitments. In the fourth quarter of 2015, the pension plan allocated $175 million to TriGate Capital, a Dallas, Texas-based private equity real estate firm; and $200 million to Houston, Texas-based Lionstone Investments. In addition to the fund commitments in the fourth quarter, CalSTRS invested $250 million in a Boston building, 50 Post Office Square, through a separate account with LaSalle Investment Management. The firm bought the 18-story office tower in December for $287.5 million from Commonwealth Ventures and Bentall Kennedy, which was selling on behalf of another California state pension, the California Public Employees’ Retirement System