CalSTRS forms $250m urban retail properties JV

The $154.8 billion pension and Dallas-based Sarofim Realty Advisors has selected Los Angeles-based developer Primestor Development to develop, redevelop and acquire retail properties with an eye toward establishing a stable portfolio of core assets.

The California State Teachers’ Retirement System (CalSTRS) has formed a real estate joint venture with Dallas-based Sarofim Realty Advisors and Los Angeles-based developer Primestor Development focussed on urban retail properties. The partnership has the potential of reaching $250 million in commitments.

This partnership is a continuation of an eight-year relationship. In 2004, the $154.8 billion pension and Sarofim formed the Community Retail Development Fund (CRDF), to invest with local and regional partners on retail properties in underserved communities. 

Recently, CalSTRS and Sarofim appointed Primestor to develop, redevelop and acquire retail properties with an eye toward establishing a stable portfolio of core assets over time. A spokesman for CalSTRS said that the pension plan is making an initial $100 million commitment to the venture. The commitment has the potential to grow to $250 million.

The first project of this venture will be the development of a community shopping centre in South Gate, approximately seven miles southeast of downtown Los Angeles. The strategy for the South Gate project is to build a retail asset to attract national and major regional retailers. 

“We see our partnership with Sarofim and the CRDF commitment to Primestor as an opportunity to develop a number of income-producing assets while also helping us achieve our goal in rebalancing the portfolio,” said CalSTRS chief investment officer Christopher Ailman in a statement. He added: “By building toward core, we also avoid the often overheated core buying market.” 

CalSTRS has been seeking quality California investments to realign its real estate portfolio toward an emphasis on core assets. The state pension plan reviewed its real estate programme in 2010 at which time core comprised roughly 30 percent of its portfolio. CalSTRS Real Estate Policy was updated with a goal to increase core assets to encompass 40 percent to 60 percent of the portfolio, generating expected returns of between 7 percent and 9 percent before fees.