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Texas TRS commits $478m to RE funds

The $127.9 billion pension system returned to two of its previous managers in its latest round of commitments.

The Teacher Retirement System of Texas (TRS) wrote two checks to real estate fund managers in late April, according to a new commitment document that the pension plan released last week.

TRS, which managed $127.9 billion as of August 31, allocated about $278 million to Lone Star’s latest commercial real estate fund, Lone Star Real Estate Fund (LSREF) V. The Dallas-based firm closed the fund in April on $5.9 billion. Lone Star launched LSREF V in December, according to a filing with the US Securities and Exchange Commission (SEC). The firm had a $5 billion target and a $5.5 billion hard cap for LSREF V, and ended fundraising in a single close. The real estate series of funds at Lone Star targets commercial real estate debt and equity investments in the Americas, Western Europe and Asia Pacific.

PERE understands that 95 percent of LSREF V’s limited partner base consisted of returning investors, including TRS, which committed $300 million to the predecessor vehicle in April 2015, according to PERE Research & Analytics. Major investors in LSREF V included Oregon Public Employees’ Retirement Fund, Teachers’ Retirement System of the State of Illinois and South Dakota Investment Council, which all allocated $300 million, according to PERE Research & Analytics. The firm drew about $385 million of the fundraising total from its affiliates, including asset management company Hudson Advisors and Lone Star’s chairman John Grayken, sources familiar with the fund told PERE.

Last month, TRS also earmarked $200 million to DivcoWest’s latest fund, DivcoWest Fund V. The San Francisco-based firm held a $1.1 billion close for its latest office fund in May, according to a filing with the SEC. TRS previously committed to DivcoWest Fund III, according to the pension system’s website.

Other investors in DivcoWest Fund V include Texas Municipal Retirement System (TMRS), which agreed to invest $75 million, according to PERE Research & Analytics. Divco plans to invest capital from the vehicle in office and research and design properties across the United States with a focus on the western US, according to TMRS documents. The value-added fund, which was launched in October, is targeting $1.5 billion, a significant increase from its predecessor vehicle, which had a $750 million target and attracted $976 million for a final close in April 2014. For its latest fund, Divco is targeting a net internal rate of return between 10 and 13 percent, according to media reports.

In late March, TRS wrote a $150 million check to AEW Capital Management’s latest senior housing fund, AEW Senior Housing Investors III. The value-added US fund was launched in April, according to a filing with the SEC.