CalSTRS invested $1.363b in U.S.-focused real estate funds in the first half of 2023
The $321.3 billion California State Teachers’ Retirement System (CalSTRS) has invested in six real estate funds, for a total of $1.363 billion, in the first half of 2023.
The largest investment is $797 million in PacificCal Debt II, a joint venture with PCCP, the Los Angeles–based real estate firm. PacificCal Debt II will invest in debt secured by core real estate in the United States. PCCP has a history of originating senior and mezzanine loans that fund value-add business plans, properties that are being repositioned in the market, construction loans, loans on vacant buildings, loans for discounted payoff and discounted note acquisitions and permanent loans on stabilized properties. CalSTRS had already invested $495 million in PacificCal Debt II in 2018 and invested $297 million in PacificCal Debt V in 2021.
CalSTRS is also investing $200 million in LDP Cal I, a controlled multifamily joint venture from CalSTRS and the manager Jair Lynch Real Estate Partners. The fund will invest in a diversified portfolio of core, value-add and opportunistic real estate transactions in the United States.
The pension fund has also made co-investments to Harrison Street Real Estate Partners (HSREP) IX of $100 million, to BentallGreenOak (BGO) US Cold Storage of $100 million and to The Urban Vision Fund I of $66 million.
Managed by Harrison Street, HSREP IX is a closed-end value-add fund that will invest in various property types in the United States, including healthcare, medical office, R&D, self-storage, senior housing and student housing. The fund is seeking to raise $4 billion. While CalSTRS has invested in Harrison Street’s Europe Property Partners fund series previously, this is the pension fund’s first investment with the firm that is focused on the U.S. market.
BentallGreenOak US Cold Storage is managed by the Miami-based real estate investment firm BentallGreenOak. Though the fund initially set a target for a $400 million fundraise, the high demand for cold storage facilities across the country and the resulting investment opportunities have helped the fund to amass $1.19 billion to date, according to data from IREI.Q, Institutional Real Estate, Inc.’s proprietary market intelligence research tool. CalSTRS is a significant contributor to that capital accumulation; the pension fund’s $100 million investment this year follows a $225 million investment to BGO US Cold Storage in June 2022.
The $66 million co-investment with The Urban Vision Fund I will help Primestor Development, the fund’s manager, to invest in developing and purchasing retail, transit-oriented and mixed-use assets in urban and minority communities. The fund has a particular focus on markets within California.
CalSTRS is also investing $100 million in Fairfield US Multifamily Value Add Fund IV, a closed-end fund that will invest in multifamily properties in the United States. The fund is managed by the San Diego–based multifamily investment firm Fairfield, with which CalSTRS has invested previously, including a $250 million commitment to the firm’s U.S. Multifamily Core Plus Fund I in September 2019.
CalSTRS’s real estate investments in 2023 total $1.363 billion and increase the pension fund’s real estate holdings by a net $342 million, as CalSTRS also disposed of $1.021 billion of past real estate investments in the same period.
CalSTRS posted a 6.3 percent net return for the fiscal year that ended on June 30, in line with its benchmark of 6.3 percent.
Over the past three, five and 10 years, the fund has posted annualized returns of 10.1 percent, 8.2 percent and 8.7 percent, respectively, outperforming its respective benchmarks for those time periods of 9.1 percent, 7.5 percent and 8.4 percent.
CalSTRS’s real estate holdings, which make up 16 percent of the fund’s portfolio ($50.7 billion), returned -0.5 percent for the year, above its benchmark of -3.9 percent. Over the past three, five and 10 years, CalSTRS’s real estate investments have returned 10.5 percent, 9.2 percent and 10.0 percent, respectively, each performing above its respective benchmark of 7.5 percent, 6.6 percent and 8.5 percent.
The highest-returning asset class for CalSTRS this fiscal year was global equity with a net return of 16.7 percent, above its benchmark of 16.3 percent.
For more information about these commitments or other funds, please visit our IREI.Q database.