The California State Teachers’ Retirement System has committed $36.3 million to two follow-on funds being raised by PCCP and Fortress Investment Group.
The $134 billion pension has invested $15 million in PCCP’s PMRP Preferred, a follow-on joint venture to a Lehman Brothers’ mezzanine fund the Los Angeles-based firm acquired in December last year.
PCCP Mezzanine Recovery Partners – formerly Lehman Brothers Real Estate Mezzanine Partners I – raised $1.1 billion of equity in 2005. CalSTRS originally invested $43.8 million in the fund, which targets first mortgages, CMBS, high-yield mezzanine, preferred equity and corporate investments. This week the pension said it had committed new equity to the follow-on fund to “make an offensive investment with highly attractive returns on its existing” investment. 
With an actual allocation to real estate of 9.5 percent, the pension’s property portfolio was now valued at $12.7 billion – $4.6 billion invested in core real estate and $8.1 billion invested in tactical, often fund, investments.
The new commitment was made in the three months to the end of December 2009. According to SEC filings, PMRP is targeting $125 million of equity, and had raised $105.5 million as of mid-December last year.
CalSTRS also committed $21.3 million to Fortress’ latest follow-on offering, Fortress Florida Preferred Fund. The fund is targeting $325 million, according to CalSTRS, and is being raised to pay down debt on Fortress’ investments and allow “Fortress to
focus management’s efforts on the investment’s business plan and maximise the overall value of the underlying companies”.
CalSTRS expects to earn a 20 percent cumulative preferred dividend, pension fund documents added.
In 2007, Fortress raised at least $1.5 billion from 51 investors for a Florida Co-Investment Fund. The firm started raising follow-on equity through the Florida Preferred Fund in January this year, and according to SEC filings had raised $74 million by early February.
The California pension said net asset values in its core and tactical real estate investments had started to rise after hitting a trough at the end of June 2009. With an actual allocation to real estate of 9.5 percent, the pension’s property portfolio was now valued at $12.7 billion – $4.6 billion invested in core real estate and $8.1 billion invested in tactical, often fund, investments.
The tactical portfolio has $8.13 billion of equity in 117 funds and deals, involving international, opportunistic, urban, land and specialty real estate, and was valued at $8.11 billion as of the end of 2009.
California tactics # of investments NAV Outstanding Commitments International – non-US 47 $2.96bn $1.3bn Specialty – specific sector focus and strategies, incl mezz debt. Mod to high rtns 42 $1.74bn $2.93bn Opportunistic – domestic and global. High rtns 37 $2.39bn $1.5bn Urban – focused on urban centres 19 $993m $1.69bn Land – domestic land and infrastructure, hold periods 2-10 yrs 9 $33.44m $715.65m
As of the end of December 2009, CalSTRS tactical portfolio had made $8.13bn of equity commitments to 117 deals, with an NAV of $8.11bn.
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