UNITED STATES - California State Teachers Retirement System significantly slowed its real estate investing during the last quarter of 2008 and added just one small investment to its portfolio.
This time around, CalSTRS spent just $33.75m (€27m) as a follow-on investment with Principal Mortgage Value Investors, though earlier in the year the pension fund had invested $1.03bn in Q1, $1.93bn in the second quarter and $940m in Q3 2008.
This situation is reflective of the experience facing many US pension funds who have made very small commitments, if any, to real estate investments over the last few months of last year.
Investors are understood to want to wait until the market has stabilised and until they have fresh assets to invest, as total plan assets dropping for some investors by around 30% in the second half of 2008.
CalSTRS' latest investment in Mortgage Value Investors was based on the recommendation of its real estate independent fiduciary, Bonuccelli & Associates, and is said to have been made because the partnership met the standards of CalSTRS' due diligence.
This new investment by the pension fund will facilitate a recapitalisation of the partnership, which includes the pay down and refinancing of the credit facility this the commingled fund holds.
It is allocated as part of CalSTRS' tactical real estate portfolio and in this case is projected to deliver minimum real net-of-fess IRR of 9%.
The investment strategy is to place capital in debt-related real estate investments such as mortgages, bridging loans, mezzanine, B-notes and other debt products related to commercial real estate.
The pension fund made its first $100m investment into the commingled fund in April 2007 and was quickly followed in May 2007 by a further $100m. The total size of the commingled fund is now $297m.