Following the recent acquisition of a majority interest in LCOR, the Berwyn, Pennsylvania-based real estate developer has become the centrepiece in plans by the California State Teachers’ Retirement System (CalSTRS) to build its own core assets and thereby avoid increased competition and tight pricing.
Mike Sicilia, a spokesman for the $154 billion state pension plan, told PERE: “This allows us to build significant core assets on a regular basis. The multifamily projects also will provide us with income moving forward.”
As part of the deal, CalSTRS has not only purchased a more than 90 percent stake in LCOR, but it also has acquired several real estate holdings owned by LCOR’s former owner, the estate of Lehman Brothers Holdings. The transaction values the operating company and the included real estate at more than $820 million.
Along with LCOR’s operating and development businesses, which include more than 7,400 multifamily units, 7.7 million square feet of commercial space and a substantial development pipeline of mixed-use real estate, CalSTRS has acquired ownership stakes in 14 multifamily assets comprising nearly 5,000 units. Among the assets included in the transaction are 308 apartment units at 25 Broad Street in New York and assets in Aventura, Florida and Tysons Corner, Virginia.
With the transaction now closed, CalSTRS anticipates expanding the LCOR relationship with additional investments in future development and redevelopment of multifamily and commercial real estate assets, broadening its holdings of core real estate in the Washington-to-New York corridor. Development opportunities include locations in Tysons Corner; Hoboken, New Jersey; and downtown Manhattan.
As part of its overall real estate strategy, CalSTRS has been looking to invest in more stable, income-producing properties. The pension plan has set a goal to have roughly half of its $19 billion in real estate allocated to core investments. Documents from its April board meeting revealed that, as of fall 2011, that figure was at 31 percent.
In a statement, Timothy Works, the CalSTRS portfolio manager overseeing the new venture, said: “We are extremely pleased to partner with such a quality company and look forward to capitalising on the growth potential of this enterprise.”