CalSTRS to invest $500m via Blackstone co-investment deal

The California State Teachers Retirement System (CalSTRS) has set up a $500m (€417.4m) co-investment strategy with Blackstone with a view to gaining exposure to opportunistic as well as core-plus real estate assets.

The $188.7bn US pension fund said it would split the capital going into the new co-investment vehicle – called Blackstone REP Account C – between two strategies.

CalSTRS told IPE Real Estate it would invest up to $300m each into co-investments alongside Blackstone’s opportunistic commingled funds and the manager’s core-plus commingled funds, known as Blackstone Property Partners.

Blackstone declined to comment on the arrangement.

“The CalSTRS-Blackstone co-investment vehicle is expected to invest significantly in large transactions, and as a result the CalSTRS co-investment vehicle will provide the pension fund real estate with a unique look-through exposure to major transactions that would not otherwise be accessible to a single investor,” the US pension fund said.

Blackstone was a major player in larger deals, it said.

“The investment staff at CalSTRS expects that Blackstone’s dominant track record in large investments combined with more limited competition for larger deals will lead to the co-investment vehicle with Blackstone generating alpha,” the pension fund added.

CalSTRS said it believed returns on the co-investment with Blackstone would be 15% net IRR on any deals on opportunistic real estate and 9-12% net IRR on the core-plus investments.

The co-investments with Blackstone could take place on a global basis, with some located in the US as well as in international markets, including Europe.

The structure of the co-investment calls for CalSTRS to have approval rights over all deals in the relationship, the scheme said.

CalSTRS has made several commitments with Blackstone into its opportunistic and core-plus funds.

The pension fund has invested a total of $1bn into the Blackstone Property Partners funds, with this amount evenly split between core-plus funds in the US and internationally.