Connecticut earmarks $150m to RE funds

Connecticut Retirement Plans and Trust Funds is writing checks to two real estate managers with which it has previously invested, according to materials from its Wednesday meeting.

The Hartford, Connecticut-based pension system earmarked $100 million to Starwood Capital Group’s latest opportunistic fund. The Greenwich, Connecticut-based firm launched Starwood Global Opportunity Fund XI last year, with an equity goal of up to $6 billion. The funds in the series typically target a mix of distressed and cash-flowing assets.

Starwood amassed a total of $5.6 billion for Fund X in March 2015 and $4.2 billion for Fund IX in April 2013. The firm held a first close for its latest vehicle in October on $2.7 billion, PERE previously reported. CRPTF has a total of $250 million of exposure to Funds VII, VIII, IX and X, the pension system’s treasurer said.

Other limited partners in Fund XI included Public Employees Retirement Association of New Mexico, which designated $75 million in June; the Teachers’ Retirement System of the State of Illinois, which agreed to invest $300 million in August; and the Teacher Retirement System of Texas, which pledged $200 million in September, according to PERE data. Aside from US pension plans, Asian and Middle Eastern sovereign funds are also understood to be part of Fund XI’s investor base.

With Fund XI, Starwood intends to invest in approximately 50 to 60 transactions, primarily in North America and Europe, with a gross target of 17-20 percent and a net internal rate of return target of 14-16 percent, according to PERA’s meeting minutes.

This week, CRPTF also allocated $50 million to Blackstone’s latest European fund. The firm started fundraising for Blackstone Real Estate Partners Europe V in November 2015 with a €7 billion equity goal. In February, the firm held an interim close on €6.6 billion, PERE previously reported.

Blackstone is planning a June final close for BREP Europe V at its €7.5 billion hard-cap, according to CRPTF meeting materials. The firm held a first close in March 2016 on €4.6 billion. The fund was generating a 1x multiple on investments at year-end, according to the firm’s fourth quarter earnings results, but Blackstone has not yet disclosed returns for the vehicle.

The firm is targeting a 15 percent net IRR and a 1.7x net multiple for BREP Europe V, according to documents from one of its investors, the San Francisco Employees Retirement System. Blackstone plans to invest 60 percent of the fund’s capital into the core European markets of the UK, Germany and France, but it will also pursue distressed assets in Ireland, Italy and Spain.

CRPTF has invested across Blackstone’s other real estate strategies, including a $100 million commitment to its most recent global opportunistic fund, BREP VIII; $50 million to BREP Europe III; and allocations to both of Blackstone’s real estate debt-focused funds, according to PERE data.

CRPTF managed $2.2 billion in real estate out of its $29.3 billion overall portfolio as of June 30, according to its most recent investment report. The pension system’s real estate portfolio returned 11.5 percent in the fiscal year that ended June 30, just below its 11.8 percent benchmark. The fund overall generated a 0.4 percent return in the same period.