The California State Teachers’ Retirement System (CalSTRS) looked to Texas for the bulk of its real estate activity in the fourth quarter, according to the pension system’s most recent quarterly activity report for the asset class.
The nation’s second-largest pension plan made a $175 million commitment to TriGate Capital, a Dallas, Texas-based private equity real estate firm, according to CalSTRS’ quarterly report. The pension system allocated $75 million to TriGate’s opportunistic TriGate Property Partners III, with an additional $100 million for co-investment. CalSTRS had committed $100 million to the firm’s second fund and was the sole investor in TriGate’s first $120 million fund in 2007, according to PERE Research & Analytics.
For its latest fund, TriGate held a first close in December with capital exclusively from returning institutional investors. The firm has a $350 million target for the third vehicle with a hard cap of $400 million. The firm closed TriGate Property Partners II on $324 million in June 2013 and finished deploying capital from the vehicle in December.
Sources told PERE the firm has a plan for capital deployment similar to the earlier funds in the series, seeking distressed debt and equity of existing properties with the goal of value creation through the recapitalization and repositioning of Class A and B real estate assets. TriGate focuses its activities in Sunbelt markets including Florida, Georgia, Texas, Arizona, Colorado and California and has made multiple investments in suburban Boston and Chicago.
CalSTRS also wrote a $200 million check to Houston, Texas-based Lionstone Investments in the fourth quarter. The pension system split its commitment equally between capital for the firm’s fourth US value-add fund and for co-investments. Lionstone has a $500 million target for the vehicle and will invest in offices and mixed-use properties. Other investors in the fund include the Teacher Retirement System of Texas, which allocated $100 million, according to PERE Research & Analytics.
In addition to the fund commitments, 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. The 779,241 square foot building was 90 percent occupied in December, according to real estate data provider Real Capital Analytics.
CalSTRS had $179.4 billion in assets as of January 31. Real estate made up 12.7 percent of the pension system’s portfolio as of June 30.