CalSTRS earmarks $900m for RE

California’s second-largest public pension invested in four real estate funds across return profiles last quarter.

The California State Teachers’ Retirement System (CalSTRS) bet on real estate funds across the world in its second quarter allocations, the pension fund said in its quarterly report.

CalSTRS, which has $26.2 billion invested in real estate out of a $188.7 billion fund as of June 30, wrote a $300 million check to Kildare Partners’ second opportunistic European vehicle, according to the second quarter investment report.

The pension fund previously allocated $200 million to Kildare’s debut vehicle, which closed in 2014 on approximately $2 billion, PERE previously reported. The firm has a $2 billion target for Kildare European Partners II.
Kildare’s first fund was invested in real estate and real estate-related non- and sub-performing debt in European markets, including the Germany, the UK and the Netherlands. Kildare European Partners II offers investors a continuation of this strategy, albeit with less emphasis on the UK and more on continental Europe.

Other investors in the vehicle include the Texas Municipal Retirement System (TMRS), which allocated $100 million; New Mexico Educational Retirement Board, which invested $80 million; and Texas Permanent School Fund, which earmarked $75 million, according to PERE research.

In the second quarter, CalSTRS also allocated $300 million to Lone Star Real Estate Fund (LSREF) V. Dallas-based Lone Star Funds closed its fifth commercial real estate vehicle in April on $5.9 billion, PERE previously reported. The opportunistic real estate series of funds at Lone Star targets commercial real estate debt and equity investments in the Americas, Western Europe and Asia Pacific.

LSREF V’s investor base was comprised of 95 percent of returning investors, which included corporate and public pension funds, sovereign wealth funds, university endowments, foundations and high net worth individuals. Major investors included Oregon Public Employees’ Retirement Fund, Teachers’ Retirement System of the State of Illinois and the South Dakota Investment Council, which each allocated $300 million, according to PERE research.

CalSTRS also earmarked $200 million to DivcoWest Fund V. San Francisco-based DivcoWest held a first close for its latest office fund in May on $1.1 billion, PERE previously reported. Other investors in the value-added vehicle include the Texas Teachers’ Retirement System, which invested $200 million, and TMRS, which allocated $75 million, according to PERE research. Divco plans to invest in office and research and design properties across the United States with a focus on the western US, according to TMRS documents.

In its only core allocation in the second quarter, CalSTRS wrote a $100 million check to JPMorgan’s open-ended, Asia-focused fund. JPMorgan is deploying the vehicle’s capital to Asian gateway cities, according to CalSTRS’s second quarter investment report. The firm launched the fund earlier this year, picking up a $250 million commitment from the California Public Employees’ Retirement System in August, PERE previously reported.

CalSTRS saw its real estate portfolio slightly underperform its benchmark in the asset class during its most recently completed fiscal year, PERE reported in July. The pension system returned 1.4 percent overall and 11.1 percent in real estate for the 12-year period ending June 30. The asset class’s custom benchmark return was 12.6 percent. By comparison, CalSTRS’ portfolio returned 4.8 percent overall and 13.4 percent in real estate during fiscal year 2014 to 2015, performing 1 percent over the real estate benchmark.