NORTH AMERICA - California State Teachers Retirement System (CalSTRS) approved $731m (€581m) in new real estate commitments in the first quarter of 2012.

They include two strategies to develop US apartments - a $250m commitment to an existing joint venture with BlackRock, and a $99m investments with LCOR Residential Associates.

A CalSTRS spokesman said both investments offered the pension fund an opportunity to build significant core assets on an ongoing basis in a market sector with proven growth potential, and to generate 7-9% returns.
Both strategies will place capital on an opportunistic basis, including developing new properties and improving existing assets to a standard that makes them core in the future.

Apartments are the main focus, but infill mass transit-oriented development sites and mixed-use multifamily commercial sites could also be considered. CalSTRS has also committed $281m to a new joint venture with Principal Real Estate Investors to invest in retail properties.

The CSJV GGCal joint venture will have a total of $292m in investment equity and will invest in retail shopping centres in Baltimore, Washington DC and northern Virginia.

The deals for the joint venture will be heavily weighted to core investments, although it can consider value-add and opportunistic plays. The expected return is in the range of 8-15%, before fees are paid.

CalSTRS has also committed $100m to the Blackstone Real Estate Partners VII fund, while also reducing its investment in the Hearthstone Housing Partners III fund by $50m.

The pension fund made the move on the basis that market changes have made it no longer advantageous to pursue assets for the fund.

A pension fund spokesperson said CalSTRS did not remove all of its commitment from the strategy to cover the investments already made and the expenses associated with those allocations.

CalSTRS made a $300m commitment to the fund in 2006, its first investment in housing. The pension fund reduced its commitment by $125m in the second quarter of 2011, and had valued the investment at $31.9m at the end of the third quarter.