Texas Municipal to commit $600 million to real estate in 2013

The $19.3 billion pension plan projects that its portfolio in the asset class will more than triple in value by the end of 2013.

The Texas Municipal Retirement System (MRS) expects to invest up to $600 million in real estate in 2013, as it continues to strive to meet a long-term 10 percent allocation target in the asset class.

Up to $200 million of that capital will be allocated to new value-add and opportunistic real estate investments, while up to $300 million will go to new core strategies, including core investments, commercial mortgages and public securities, according to Texas MRS’ 2013 real estate implementation plan. New core investments could include increases to existing core fund allocations through previously approved dividend reinvestment programmes.

The remaining $100 million, meanwhile, already has been earmarked for a commitment to Mesa West Capital’s Mesa West Core Fund, a core debt fund that was one of four real estate commitments totalling $300 million approved at the pension plan’s board meeting last week. The other $200 million in commitments – which included $100 million to Harrison Street Securities and $50 million each to Harrison Street Real Estate Capital as well as Core and Value Advisors – were applied to Texas MRS’ 2012 real estate implementation plan.

Additionally, Texas MRS plans to request board approval to consider co-investment opportunities to help fulfill the projected real estate allocations for 2013. At an August board meeting, the pension plan’s real estate consultant, ORG Portfolio Management, recommended staff be granted discretion for co-investments, provided allocations were limited to $50 million per manager.

Texas MRS’ 2013 real estate investment activity could help triple it’s the pension’s property portfolio size from $357.5 million at year-end 2012 to $1.1 billion at year-end 2013, according to the implementation plan. With additional allocations of $600 million to real estate in both 2014 and 2015, the pension system’s real estate portfolio is projected to reach $2.3 billion by the end of 2015.

Texas MRS, which began investing in real estate last year, had allocated $246.4 million of $19.3 billion in total assets, or 1.3 percent, to real estate as of 30 June, compared to a long-term target of 10 percent for the asset class.