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CalSTRS commits $800m to RE

The $189.08 billion pension system earmarked half of its allocation to non-core managers, including Kildare Partners and CBRE Global Investors.

The California State Teachers Retirement System (CalSTRS) pledged $800 million to real estate during the quarter ended June 30. All but one of the pension system’s six investments during the three-month period were made through commingled funds.

Within the quarterly allocation, CalSTRS designated $400 million to value-added and opportunistic managers. The value-added investments included a $50 million commitment to Brookfield Asset Management’s Brookfield Fairfield US Multifamily Value-Add Fund II, in a follow-on investment to CalSTRS’ original $50 million commitment to the vehicle during the third quarter of 2013. The fund will pursue the acquisition of US multifamily properties for rehabilitation and development.

Another value-added commitment was a $200 million capital outlay to CBRE Global Investors’ CBRE Strategic Partners US Value 7. That vehicle is focused on buying real estate at a discount to replacement costs and subsequently enhancing the values of those properties in markets that are projected to outperform. CalSTRS previously has been a limited partner in multiple CBRE funds, including CBRE Strategic Partners US Value 5 and 6.

The pension system also agreed to invest a total of $150 million in two opportunistic real estate managers, Kildare Partners and The Resmark Companies. CalSTRS’ $100 million commitment to Kildare European Partners I was an addition to its original $100 million investment in October 2013 to the vehicle, which will invest in a broad range of real estate and real estate-related assets in Western Europe. Meanwhile, CalSTRS’ $50 million pledge to ResCal, an existing $255.1 million joint venture with Resmark, also followed previous commitments totaling $200 million to the partnership, which will focus on investments in for-sale single-family housing projects and residential land acquisition and development.

Additionally, CalSTRS made $200 million commitments each to two core real estate funds, Jamestown’s Jamestown Premier Property Fund and PCCP’s PCCP Credit VI. The Jamestown fund represented the pension plan’s sole new real estate relationship during the quarter and will target US core and core-plus office, retail and mixed-use assets that obtain a significant amount of their total return from current cash yield. PCCP’s fund will pursue investments in customized loans geared towards generating absolute return, current income and downside protection. The pension system previously invested in PCCP Equity VI and PCCP Mezzanine Recovery Partners I.

The pension plan also disclosed that it made six real estate dispositions during the quarter. The dispositions included IDS Realty JV, a value-add industrial joint venture with IDS; a share sale in German property firm Gagfah through Fortress Investment Group; two international property funds, Fortress Residential Investment Deutschland and Fortress Investment Fund II; and two opportunistic co-investment ventures, Fortress RIC Coinvest with Fortress and MSREF V International Project Green with Morgan Stanley. With these dispositions, CalSTRS sold its public holdings and liquidated its fund and co-investment assets.

As of June 30, CalSTRS held $22.12 billion in its real estate portfolio, of which $9.97 billion was in core, $3.05 billion in value-added and $9.06 billion in opportunistic real estate. The asset class represented 12.31 percent of the pension plan’s overall portfolio at the quarter’s end.