CalSTRS commits $400 million to TriGate, plus others

The $154.8bn pension plan has completed four investments with new and existing managers, including a commitment to an opportunistic fund managed by TriGate.

The California State Teachers’ Retirement System (CalSTRS) approved a total of $400 million in investments to three existing real estate managers and one new firm during the first three months of its fiscal year 2013, which began on 1 July, according to the pension system’s latest quarterly real estate investment report.

A quarter of the capital, or $100 million, was earmarked for an opportunistic debt strategy, TriGate Capital’s TriGate Property Partners II. The $300 million fund will pursue direct investments in distressed debt and equity of existing properties in the southeastern US, with the goal of value creation through the recapitalisation and repositioning of real estate assets. CalSTRS previously committed to TriGate’s 2008 fund, TriGate Property Partners I and additionally formed partnerships with the Dallas-based private equity real estate firm in 2007, according to the pension plan’s website.

CalSTRS also invested $125 million in a previously-announced joint venture with Thomas Properties Group. The value-add venture was formed to buy out the ownership interests of two partners in a three-million-square-foot office portfolio in downtown and suburban Austin, Texas. The expectation is that “simplifying the partnership structure, lowering leverage and increasing ownership will result in returns higher than the ODCE benchmark,” according to the CalSTRS report. The pension system also created partnerships with Thomas Properties in 2010.

The primary focus of the commitments, however, was to continue building the core portfolio, CalSTRS noted in its report. Indeed, the pension plan committed $100 million to a new manager, Invesco, through its Invesco Core Real Estate USA. The $3.8 billion fund seeks to generate stable income by investing in core real estate throughout the US, focusing on major markets and coastal regions. The vehicle invests in well-leased core multifamily, office, retail and industrial properties.

Furthermore, the pension plan made an additional capital outlay of $75 million to UCal, an existing joint venture with Principal Real Estate Investors. UCal will continue to invest in US student housing by purchasing campus-area assets that can renovated to add value and maintain high occupancy levels, as well as setting up fee arrangements with developers to build new student housing close to campus.

As of 31 October, CalSTRS held $21.88 billion in real estate assets, or 14.1 percent of its total portfolio, above its current target of 12 percent. The real estate portfolio was 46.1 percent allocated to opportunistic; 34.2 percent to core; 17.9 percent to value-add; and 1.8 percent to public securities at the end of the September.