CalSTRS commits $200m to non-core real estate

Despite a heavy weighting to core, the $163.68 million pension plan invested only in value-added and opportunistic real estate strategies during the first quarter.

The California State Teachers’ Retirement System (CalSTRS) has closed on two real estate investments totaling $200 million with existing managers during the first quarter, according to an investment activity report released this week. 

The pension system has committed $125 million to a value-added joint venture with Los Angeles-based Primestor Development. CalSTRS is making the investment through the Community Retail Development Fund, which it formed with Sarofim Realty Advisors in 2004 to invest with local and regional partners on retail properties in underserved communities. 

The Primestor partnership, which potentially could be funded with up to $250 million in commitments, will develop retail properties in densely populated, Hispanic markets located primarily in California and the western US. CalSTRS previously announced the launch of the partnership in November.

Meanwhile, CalSTRS has committed $75 million to Paladin Realty Partners’ latest Latin America-focused fund, Paladin Realty Latin America Investors IV, through a parallel sidecar vehicle. The co-investment vehicle will adopt the firm’s investment strategy of forming programmatic housing joint ventures targeting the rapidly-growing middle class and demand for affordable housing in Latin America, as well as pursuing opportunistic investments in select commercial properties and distressed situations. 

CalSTRS has been a lead investor in all of Paladin’s Latin American funds, beginning with the initial closing for Paladin Realty Latin America Investors in 2000. The pension plan’s first-close commitment to Fund IV in March was followed by the Overseas Private Investment Corporation’s financing commitment of up to $100 million, which was announced earlier this month. 

Separately, CalSTRS revealed earlier this month that it is seeking a new real estate portfolio manager, reporting to director of real estate investments Mike DiRe. The manager will be responsible for managing and developing a subset of the pension system’s real estate portfolio; conducting site, market area and physical property inspections; and developing new real estate investment strategies. 

As of March 31, CalSTRS held $22.17 billion in real estate, accounting for 13.6 percent of its total portfolio. Of that $22.17 billion, $8.33 billion was in core, $3.56 billion in value-add and $9.91 billion in opportunistic.