Texas Permanent ups RE exposure

The $25 billion Texas Permanent School Fund has decided to increase its real estate allocation, which will enable it to make $200 million in new investments. As a result, the endowment has made a new commitment to one value-added fund and increased its previous commitment to another opportunistic vehicle. 

At its 19 July board meeting, Texas Permanent increased its real estate allocation target to 8 percent from 6 percent, based on recommendations from Cambridge, Massachusetts-based investment consultant NEPC. The endowment now will work with its real estate consultant, Courtland Partners, on a longer-term strategy. 

As a result of the increased allocation, Texas Permanent will be able to make an additional $200 million in real estate investments. Market sources have said that this increase is simply the result of the endowment’s consultant reviewing its asset allocation every two years and deciding that the most effective investment mix currently should include more real estate. Representatives from the endowment declined to elaborate beyond its meeting webcast. 

Already, Texas Permanent has made $100 million in new real estate investments. Last November, the endowment approved a commitment of $50 million to Oaktree Real Estate Opportunities Fund V, an opportunistic commingled vehicle targeting distressed real estate. The new 8 percent allocation has enabled the endowment to increase its commitment to Fund V by $25 million to $75 million. 

In addition, Texas Permanent recently approved a commitment of $75 million to Mesa West Capital’s property debt fund. Mesa West Real Estate Income Fund III is a closed-ended commingled vehicle that will provide financing for value-added real estate investments across the US, targeting office, industrial, retail, apartment and hotel assets.

The Austin-based state school fund is one of the largest educational endowments in the US, second only to that of Harvard University.