REAL ESTATE- The California State Teachers Retirement System(CalSTRS) made $3.7bn (€2.8bn) worth of commitments to real estate during the fourth quarter of 2006.
Among these commitments were a $200m investment into Heitman Value Partners II and $400m in Beacon Capital V. CalSTRS made the commitment with Heitman based on the recommendation independent fiduciary of Courtland Partners.
Heitman Value Partners II is a commingled fund managed by Heitman. The total equity raise for the fund is $800m, which will be twice was large as the first Heitman Value Partners fund created in early 2005. Heitman is expecting to have a final close on the fund raising shortly.
The commingled fund has an investment strategy of setting up joint ventures with operating partners that focus on a single property type. Some will be in the main property types and would be with companies that have expertise on either office, industrial, retail and apartments.
Heitman will also look to hook up with companies that are very experienced with some specialty property types. These could include senior housing, medical office buildings, self storage, hotels and student housing.
The manager will also allow some co-investment opportunities for Heitman Value Partners II. CalSTRS did participate in a co-investment with the first fund during the fourth quarter of 2006.
The pension fund made a $56m co-investment commitment on a diversified portfolio of senior housing assets. It made this investment with the assistance of Westwood Consulting acting as an independent fiduciary.
Beacon Capital Partners is still raising capital for Beacon Capital V. The total equity raise is $3.5bn. CalSTRS made its investment after getting some input from Pension Consulting Alliance, its independent fiduciary. Projected leverage IRRs for investors in the fund are anticipated to be in the range of 18% to 22%.
Beacon Capital had a first closing on Fund V at the end of 2006. The amount that was raised was in excess of $1bn.
The investment strategy for Beacon Capital V is to make direct equity investments in office buildings. The commingled fund looks for properties that have several common characteristics. These would be knowledge-based economies, constraints on new supply, urban markets with greater liquidity, 24-7 features and strong long-term demand fundamentals.
Most of the investments for the fund will be in the US, but up to 20% of the transactions for the fund could be located in some international markets, including London and Paris.