GLOBAL - The California State Teachers Retirement System made $370m (€270m) worth of new real estate investments during the second quarter.

One of these investments was a $200m commitment to the Fortress Credit Opportunity Fund II, based on the recommendation of independent real estate fiduciary Cambridge Associates.

The Fortress Group is looking for a total equity raise of $1.9bn on the opportunity fund and will consider a variety of deals, including distressed real estate, corporate and other asset-backed credit opportunities.

US transactions will account for most of the investments for the commingled fund, although there will be a small component for deals in Western Europe.

The real estate staff at CalSTRS has estimated a 20% gross internal rate of return (IRR) and a 16% net IRR on the fund. They expect to hold the investment for three to five years.

The other investment by CalSTRS was a new $170m investment into Pacific Cal II, based on the recommendation of independent real estate fiduciary Bonuccelli & Associates.

This is a venture managed by PCCP, and the total equity raise is for $428.5m.

The capital will be used to acquire the senior and mezzanine loans for the South Glen project in Denver. 

The transaction will restructure the existing PacificCal II asset at a lower basis, provide debt relief and gain additional term for the joint venture to executive its business plan.

Pension fund officials expect the new capital commitment to produce an IRR return of at least 9.25% and to hold the investment for five years.

CalSTRS placed this investment into its urban sector of its real estate portfolio.

The pension fund does have some room to add more assets to the portfolio, as it has an 11% targeted allocation for real estate, with a range of 9-15%.

Through the end of June, the pension fund had invested 10.1% in the asset class, or $13.14bn. 

This was split up, with $8.9bn in tactical and $4.2bn in core.

The total plan assets for CalSTRS are currently at $129.8bn.


 

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