UNITED STATES- The California State Teachers Retirement System is inching its ways towards its targeted real estate allocation of 11% as the pension fund invested $560m
(€420m) in the first quarter of this year.
CalSTRS has now invested 9.1% of its $162bn total assets in real estate and its goal is to reach its targeted allocation by the end of 2009.
Like many pension funds in the United States, CalSTRS made no commitments in the first quarter to direct investments but instead turned to tactical ventures.
One of these was a $100m commitment to the Principal Mortgage Value Investors, an investment strategy also adopted by the California Public Employees Retirement System and which is projected to see investors achieve net IRRs of 12%.
Margie Custis, managing director of capital markets for Principal Mortgage Value Investors, said the fund’s investment strategy is to focus on bridge loans as this kind of lending will make up 75% of the transactions for the fund while the balance will be attained through bonds, mezzanine debt and investing in real estate securities through commercial mortgage-backed securities.
The property types being considered for this investment are office, industrial, retail, apartments and hotels in major geographical areas where Principal has equity real estate experience.
CalSTRS’ largest commitment in the first quarter was a $200m allocation to the Morgan Stanley Special Situations Fund III, an international commingled real estate offering with a total size of $3.4bn and which makes non-controlling investments in public and private real estate companies and focuses on opportunities in growth-emerging markets, distressed regions and developed countries.
CalSTRS’s four other commitments during the first quarter were $100m into the Drawbridge Special Opportunity Fund, $100m into JER Europe Fund III, $50m into Lowe Resort Finance Investment Partners and $60m into Paladin WESRP Investors.