NYSTRS earmarks $500m for real estate

The New York State Teachers’ Retirement System (NYSTRS) pledged $534.88 million in follow-on investments to four of its existing real estate fund managers during the fourth quarter. The activity marked the pension plan’s largest quarterly commitment to property since the global financial crisis.

The majority of NYSTRS’ real estate commitments – $334.88 million – went to global and US value-added and opportunistic funds, according to documents from the pension plan’s board meeting this week. The largest of the non-core investments, a $200 million commitment signed in December, was designated for The Blackstone Group’s debut Asia-focused opportunistic fund, Blackstone Real Estate Partners (BREP) Asia.

BREP Asia had attracted $3 billion in commitments as of earlier this month, against a target of $4 billion and hard cap of $5 billion. NYSTRS previously was a limited partner in BREP V in 2006, BREP VI in 2007 and BREP VII in 2011, as well as the Blackstone Real Estate Debt Strategies II fund last year.

NYSTRS also agreed to invest $100 million in Exeter Property Group’s Exeter Industrial Value Fund III in December. The fund, which was launched late last year, is targeting $675 million in equity commitments and also includes the Pennsylvania Public School Employees’ Retirement System, which approved a $75 million commitment to the vehicle in December, among its investors. NYSTRS had backed both of Exeter’s prior industrial funds.

Additionally, NYSTRS committed $34.88 million to Lone Star Funds’ third commercial real estate fund, Lone Star Real Estate Fund III. The pension plan was a limited partner in Lone Star Real Estate Fund I and II, as well as the firm’s residential-focused fund series, Lone Star Fund III, IV, V, VI and VII.

The remaining $200 million was allocated to NYSTRS’ core real estate portfolio through a commitment to Brookfield Asset Management’s Brookfield DTLA Holdings. That vehicle was formed last year, following the acquisition of MPG Office Trust by Brookfield’s publicly-traded office real estate company, Brookfield Office Properties, and owns both Brookfield Office Properties’ existing downtown Los Angeles office assets and all of MPG’s properties. Brookfield Office Properties owned approximately 47 percent of the vehicle as of last October, while institutional partners such as NYSTRS will account for the remaining 53 percent interest. The pension plan had committed to another Brookfield core office fund, Brookfield Properties Office Partners, in 2006.

The total commitment amount, as well as the individual size of each commitment, was notable in that both were significantly larger than NYSTRS’ typical real estate investments post-global financial crisis. Quarterly fund commitments often have ranged between $100 million and $200 million in aggregate and between $50 million and $100 million per investment. Core, value-added and opportunistic funds represented $3.66 billion, or nearly 36 percent, of NYSTRS’ total real estate equity portfolio of $10.23 billion as of September 30.