The Teacher Retirement System (TRS) of Texas will invest $200 million with LaSalle Investment Management to target real estate co-investment opportunities worldwide on behalf of Ranger Co-Investment Fund III. The fund is the third in LaSalle’s Ranger series of fund-of-one vehicles that predominantly consist of capital from TRS, along with two to three percent of equity comprising the personal capital of individual LaSalle investment professionals and the firm’s balance sheet capital.
TRS’ latest commitment is the third round of capital that the pension plan has committed to the fund series, having previously invested $200 million each in Ranger I in 2009 and Ranger II in 2011. LaSalle also will be able to re-invest the capital from the prior two funds, with Ranger I now fully invested and the final investment for Ranger II expected to be executed this summer.
Like its predecessor funds, Ranger III will pursue real estate co-investment opportunities across property types, risk profiles, capital structures and geographical locations. LaSalle expects to co-invest the majority of the vehicle’s capital in ventures alongside TRS’ existing managers, although the firm may deploy a portion of the capital into co-investment opportunities involving new manager relationships. To date, LaSalle has closed on 14 co-investments with 10 different general partners on behalf of Ranger I and II.
“We’re certainly trying to put together a balanced portfolio of risk,” said LaSalle managing director Dan Witte, who oversees the Ranger funds, in an interview with PERE. Investments are “generally balanced across the risk spectrum, although value-added might the most interesting area for us right now, if we think there’s good downside protection in the underwriting.”
LaSalle doesn’t have a specific focus in terms of investment opportunities for Ranger III. “It’s really based on what are the most interesting transactions that come to us or through other TRS managers,” said Witte. However, he noted that the prior two Ranger vehicles had higher concentrations of real estate debt investments – particularly recapitalizations for existing owners – and development. LaSalle is likely to be less active in both those areas with Ranger III, as pricing has become increasingly competitive, he explained.
In addition to the Ranger funds, Texas Teachers also invested $400 million with LaSalle through its LaSalle US Property Fund, an open-end core real estate fund, in 2010. The pension system’s relationship with the firm dates back to the 1980s, when LaSalle began managing some of TRS’ real estate debt investments.
Separately, TRS has committed $50 million to Apollo Global Real Estate’s Asia-focused fund, AGRE Asia Pacific Real Estate Fund. That opportunistic fund, which is seeking $600 million in commitments, is expected to target distressed debt and equity recapitalizations, distress for control situations, corporate real estate and existing real estate platforms and companies.