The California State Teachers’ Retirement System (CalSTRS) pledged more than $1 billion to real estate during the second quarter, according to the pension system’s most recent quarterly activity report for the asset class. The allocation is one of CalSTRS’ largest in real estate since the third quarter of 2007, when the public institution made slightly more than $2 billion in property-related commitments.
The outlay also marks the second time in six months that the $191.2 billion pension system has made a quarterly allocation of more than $1 billion to real estate. CalSTRS committed $1.25 billion to real estate during the fourth quarter of 2014.
The bulk of CalSTRS’ commitments during the second quarter were designated for non-core real estate investments. In the value-add space, investments included $100 million to PAG’s PAG Real Estate Fund, which will be focused on assembling a portfolio of high-quality properties in Asia’s gateway markets. PAG is targeting up to $1.5 billion for the fund, through which the firm will acquire income-producing assets and add value through leasing, repositioning and capital improvements.
The pension system also wrote a $50 million check to Heitman’s Heitman Value Partners III, which will have a strategy of making value-add investments in asset-level partnerships with public and private real estate operating partners. Among its non-fund value-add investments, CalSTRS acquired 60 London Wall in London through a mandate with LaSalle Investment Management. The office property represented its first separate account real estate asset outside of the US.
CalSTRS’ other value-add commitments were in joint ventures, including $400 million in CP Logistics Platform, a new partnership with Principal Real Estate Investors that will pursue ‘build to core’ and ‘lease to core’ opportunities in major US industrial markets; and $200 million to ParkCal, a new joint venture with JP Morgan Asset Management that will invest in value-add and development opportunities involving well-located office properties throughout the US.
The pension system also made two opportunistic investments in funds, $100 million to PCCP’s PCCP Equity VII, which will be focused on US equity investments diversified by geography, property type, strategy and operating partners; and $100 million to Lone Star Funds’ Lone Star Real Estate Fund IV, which will be targeting transactions in the residential housing and land market.
CalSTRS’ two core commitments also were to funds, including $50 million to PCCP’s PCCP Credit VI, through which the Los Angeles-based real estate finance and investment management firm will originate high-quality, customized loans that are intended to provide absolute return, current income and downside protection to investors. The public institution also designated $250 million to DataCore, its fund-of-one with GI Partners that invests in data centers and other technology-related real estate.
CalSTRS held a total of $24.33 billion in real estate, or 12.71 percent of its overall portfolio, as of June 30. Of that amount, $12.2 billion, or roughly half of its property holdings, are in core, while $8.38 billion is in opportunistic and $3.72 billion in value-add.