The California State Teachers’ Retirement System plans to invest $818 million in real estate, according to its fourth-quarter investment report. These included commitments to funds and separate accounts with existing property managers such as Clarion Partners and new managers like MetLife.
One continuing theme from the previous quarter was the majority of its quarterly real estate allocation going to funds rather than separate accounts and joint ventures. In fact, seven of CalSTRS’ fourth-quarter investments, totaling $700 million of equity, were done through commingled vehicles.
After earmarking all of its capital to value-add and opportunistic real estate during the third-quarter, the pension plan committed heavily to core over the following three months. Of the $818 million, it designated $553 million to seven investments within the risk profile.
Among its commitments was its first to Clarion’s $4.7 billion open-end core fund, Clarion Lion Properties Fund to which it has pledged $100 million. CalSTRS also approved follow-on investments of $50 million to Invesco’s Invesco Core Real Estate USA, $100 million to JPMorgan Asset Management’s JPMCB Strategic Property Fund and $50 million to Prudential Real Estate Investors’ PRISA. The public institution previously committed $100 million, $250 million and $175 million, to the three funds respectively.
Additionally, CalSTRS agreed to invest in funds with two new managers. One was MetLife Real Estate Investors, which was secured $150 million from the pension for its $1 billion MetLife Core Property Fund, a new vehicle that is expected to be added to the ODCE Index in the near future. The other was Prologis, which received a $100 million commitment for its $2.4 billion industrial core open-end fund.
The pension plan made only two non-fund core real estate commitments. It earmarked $100 million for FidCal, a joint venture with Principal Real Estate Investors involving the development, redevelopment and select acquisition of core retail centers through the South and Southwest regions of the US. Meanwhile, CalSTRS bought Sealy & Company's ownership interest in Miller Road Industrial Park in Dallas. The SeaCal joint venture, with a 95 percent stake held by CalSTRS and the remaining five percent by Sealy, originally purchased the asset after the formation of the partnership in 2008.
The remaining $265 million of CalSTRS’ fourth-quarter real estate allocation went to three value-add property investments. CalSTRS committed $100 million to DivcoWest’s DivcoWest Fund IV, a $750 million vehicle focused on acquiring, redeveloping or developing primarily office and research and development facilities that serve technology companies throughout the US. It also approved a $65 million investment in First and Market, a separate account with Clarion that will call for redeveloping an existing asset in Portland, Oregon into an urban creative office campus.
As of December 31, CalSTRS held $22.2 billion in real estate, or 12.31 percent of its total portfolio. Of that amount, $9,713 was allocated to core, $3,054 to value-add and $9,261 to opportunistic, with the remainder going to public real estate.