UNITED STATES - The Teachers Retirement System of the State of Illinois has become one of the first pension funds in the United States to allocate funds to a separate account manager to cover possible debt issues.
The move became a reality last week after the pension fund approved a new commitment of $60m (€42.6m) to a separate account managed by KBS Realty Advisors.
The allocation will be split so $42m is used to renew or refinance maturing debt while the remaining $18m will be invested to assist capital needs and tenant improvements.
KBS is a value-added manager for Illinois Teachers and currently oversees an office building portfolio which was valued at $470.3m to the end of March 2009.
The portfolio contains a total of 20 assets, located in Atlanta, Denver, Westborough, Massachusetts, Austin, Dallas, Phoenix, Scottsdale, Oakbrook Terrace, Illinois, Irvine, San Francisco and Seattle, and most of the properties occupancy level of between 82% and 100%.
The pension fund has also been looking at its overall real estate portfolio as its real estate assets were valued at just over $4bn by the end of June. This means 13.8% of its total plan assets were invested in real estate against a target allocation of 14% to real estate.
The value of the real estate portfolio could be lowered in the near-term as not all of the pension fund's commingled fund managers have so far provided their final June financial statements.
The pension fund anticipates that the value of its real estate portfolio could have been lowered by around $1.2bn as a result of write-downs on some of its real estate portfolios, however, the final numbers will not be determined until maybe the end of September.