Texas Municipal commits $250m to real estate

The $21 billion pension system has earmarked $500 million of its $600 million 2013 allocation to the asset class. Its latest investments include $150 million to two new value-added funds.

The Texas Municipal Retirement System has approved investing $75 million each in Stockbridge Capital Group’s Stockbridge Value Fund II and Greenfield Partners’ Greenfield Acquisition Partners VII. San Francisco-based Stockbridge targets property and portfolio acquisitions ranging from $10 million to $500 million in multifamily, office, industrial and retail assets in major US metropolitan markets. Greenfield, a Connecticut-based real estate investment manager, focuses on direct investments; debt restructuring; development, redevelopment and repurposing; and repositioning assets, according to its website.

Both commitments represent follow-on investments to Stockbridge and Greenfield. Texas Municipal previously committed $75 million to both Stockbridge Value Fund I and Greenfield Acquisitions Partners VI, both of which have been strong performers for the pension plan. Stockbridge Value Fund I was generating a current value internal rate of return (IRR) of 13.7 percent and a manager-projected IRR of 15.8 percent as of March 31, according to the pension plan’s most-recent real estate portfolio summary. Meanwhile, Greenfield Acquisitions Partners VI was yielding a current value IRR of 23 percent and a manager-projected IRR of 14.5 percent. 

Meanwhile, Texas Municipal also has approved investing a total of $100 million in Stockbridge’s Stockbridge Smart Markets and Harrison Street Real Estate Capital’s public real estate investment trust affiliate, Harrison Street Securities. The core vehicles, which each received $50 million of the capital, are part of the pension system’s existing real estate portfolio. It previously committed $100 million to Harrison Street Securities and $50 million to Stockbridge Smart Markets at its December board meeting – the same meeting where Texas Municipal initially had approved a $100 million commitment to Mesa West Capital’s Mesa West Core Lending Fund. Mesa West and the pension, however, failed to reach an agreement over contract terms on the commitment and ended negotiations over the summer. 

That $100 million is the only remaining capital within the pension system’s $600 million 2013 real estate allocation that has not yet been committed. So far this year, Texas Municipal has approved $500 million to core, value-added and opportunistic strategies, including Lubert-Adler Partners’ Lubert-Adler Fund VII, Invesco Real Estate’s Invesco US Core Income Fund and Abacus Capital Group’s AbaCore I. Although the pension plan originally said that it was likely to reallocate the $100 million originally committed to Mesa West to another real estate manager at its September board meeting, it now does not expect the reallocation to occur this year.