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CalSTRS earmarks $900m to real estate

The $187 billion pension system’s six planned investments include pledges to two new fund managers.

The California State Teachers’ Retirement System (CalSTRS) has designated a total of $900 million to two new and four existing real estate managers. Of that amount, the pension plan committed $350 million to core real estate and $550 million to value-added strategies, according to its investment committee report for the quarter ended September 30.

CalSTRS’ core investments during the period included $150 million to Federal Acquisition Partners T4, the fourth tranche of a joint venture with Spaulding & Slye Investments. The new tranche, which was launched in August, will continue the partnership’s strategy of acquiring office buildings leased by the US federal government around the continental US, but now has been expanded to also include assets occupied by federal contractors. Federal Partners originally was formed in late 2004.

CalSTRS also earmarked $200 million to TCI Fund Management’s TCI Real Estate Partners Fund I, which has an $800 million target. The vehicle seeks to generate current income by investing primarily in first mortgages that typically are backed by trophy assets in Western Europe and the US. The TCI commitment represents one of two new real estate managers for CalSTRS.

In the value-added sector, CalSTRS agreed to invest $200 million to FidCal, a joint venture with Principal Real Estate Investors. The new allocation is a follow-on commitment to CalSTRS’ original $100 million commitment last year to the partnership, which will pursue development and select acquisitions of core US shopping centers throughout the South and Southwest.

The pension system also made follow-on investments to PCCP’s PacificCal V and Prudential Real Estate Investors’ PRISA II open-ended core fund. PacificCal V, which will receive $147 million from CalSTRS, will target value-added investments, primarily in US retail and office real estate. The pension plan previously pledged $98 million to PacificCal IV last year. Meanwhile, PRISA II, which was allocated $100 million, will pursue a strategy with two components – an income-generating core component and a build-to-core, lease-up component. CalSTRS was a limited partner in the predecessor vehicle, PRISA.

The public institution’s sole other commitment to a new property manager was to Meyer Bergman, pledging €75 million to Meyer Bergman European Retail Partners. The €750 million vehicle will acquire retail properties with value enhancement potential across Europe.

At the end of September, CalSTRS held $22.7 billion, or 12.18 percent, of its total portfolio in real estate. Core real estate represents the largest allocation in its property portfolio, with $10.76 billion in assets, up from $9.97 billion on June 30. Opportunistic investments, meanwhile, have declined to $8.91 billion, down from $9.06 billion on June 30 and $10.41 billion in June 2013. Value-added property has remained fairly level, clocking in at $3.01 billion in September, compared with $3.05 billion in June.