Investors - FEBRUARY 27, 2014

CalSTRS commits $818m to real estate

by Andrea Waitrovich

The California State Teachers’ Retirement System has invested $818 million in real estate in third quarter 2013, committed in 10 separate investments, according to its fourth quarter investment report.

Eight of the commitments were follow-on investments. Six were core-related investments, while two were value-added.

For its core portfolio, CalSTRS committed $300 to open-end vehicles, approximately $100 million to a joint venture, and $3 million to a separate account.

CalSTRS invested $100 million to the $7.3 billion open-end fund Clarion Lion Properties Fund, managed by Clarion Partners. It invested another $100 million in JPMCB Strategic Property Fund, managed by JP Morgan Asset Management. And CalSTRS committed $50 million each to Invesco Core Real Estate USA, managed by Invesco Real Estate, and PRISA, managed by Prudential Real Estate Investors.

CalSTRS also made a follow-on commitment to its joint venture FidCal LLC. The partnership with Principal Real Estate Investors seeks to achieve attractive risk-adjusted returns by pursuing a strategy involving the development, redevelopment and select acquisition of retail centered located throughout the South and Southwest United States.

CalSTRS also made two new investments in core, open-end funds. The pension fund committed $100 million each to Prologis U.S., managed by Prologis, and MetLife Core Property, managed by MetLife Investment Management.

CalSTRS’ core separate account with Principal became 100 percent owner of Miller Road Industrial Park, which was an asset originally purchased with CalSTRS joint venture partner Sealy & Co. The partnership is called SeaCal; CalSTRS owns 95 percent and 5 percent is owned by Sealy. The $3 million was to purchase Sealy’s ownership interest, and CalSTRS became sole owner of the asset.

CalSTRS made a value-added investment in First and Market through its separate account with Clarion Partners. CalSTRS made a $65 million commitment. The plans with Clarion call for redeveloping an existing asset into an urban creative office campus.

For CalSTRS’ value-added real estate portfolio, the pension fund invested $100 million in DivcoWest Fund IV, managed by DivcoWest. DivcoWest Fund IV acquires, redevelops or develops primarily office and research and development facilities that serve technology companies throughout the United States.

As of December 31, CalSTRS held $22.2 billion in real estate, or 12.31 percent of its total portfolio. Of that amount, $9.7 billion was allocated to core, $3.1 to value-add and $9.3 to opportunistic, with the remainder going to public real estate.

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