The New York State Teachers Retirement System (NYSTRS) has sold its 50 percent stake in the IN Retail Fund to its joint venture partner, Inland Real Estate, for $197.3 million. NYSTRS’ investment was managed by Clarion Partners.
The IN Retail Fund consists of 2.3 million square feet of retail space divided among 11 neighborhood, community and power shopping centers in the Chicago area, one neighborhood retail center in a suburb of Minneapolis and one community retail center located near Racine, Wisconsin. The portfolio was 97.5 percent leased at the time of the sale.
In a statement, Mark Weld, a managing director at Clarion in charge of the portfolio, said: “While we have enjoyed a successful partnership with Inland, the opportunity to exit at this pricing level on a highly efficient basis was very compelling.”
Indeed, the cap rate on the sale of the NYSTRS interest is 6.7 percent. This return is based on forecasted net operating income for the 12 months following the acquisition of the portfolio.
NYSTRS and Inland first formed the joint venture in 2004. In total, the pension plan invested $116 million of equity, while Inland contributed eight properties and around $48 million of equity. At the time of the sale, the value of the assets in the venture was pegged at $395 million, including total outstanding mortgage debt of approximately $152 million.
Joint ventures with NYSTRS and other institutional investors have become an important component of Inland’s investment strategy. In November, the firm expanded an existing retail venture with Dutch pension administrator PGGM by some $220 million, giving it a total capitalization of roughly $900 million to invest in community shopping centers in select Midwest markets. In early May, it formed a new $600 million joint venture with PGGM to invest in necessity-anchored retail properties primarily in Texas and Oklahoma.