People - FEBRUARY 22, 2013

Illinois Teachers hires two advisers for real estate co-investment program

by Sara Kassabian and Andrea Waitrovich

The $38.1 billion Illinois Teachers’ Retirement System (TRS) has hired ORG Portfolio Management and Real Asset Portfolio Management as advisers in creating a co-investment program as part of TRS’ $4.6 billion real estate portfolio. The two firms will join TRS’ existing advisers and its real estate consultant Callan Associates. In the co-investment program, TRS will make direct investments in existing property holdings, to supplement current investments in the same property as part of a pooled allocation to a multi-property real estate fund.

During the 2012 fiscal year, TRS posted an 8.4 percent return, or $4.66 billion, in real estate.

Since third quarter 2011, TRS has been actively changing its real estate portfolio. In August 2011, the retirement system approved increases to two of its property account managers. Core real estate separate account manager Heitman received $200 million in new capital for investments, and Dallas-based Lincoln Property Co. received $150 million in new capital for investments.

In addition, Illinois TRS ended its relationship with KBS Realty Advisors, which managed 19 real estate properties for the retirement system, representing $345 million, or 7.9 percent of the total Illinois TRS real estate portfolio as of August 2012. Management of the properties was transferred to Lincoln Property in August.

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