UNITED STATES - Teacher Retirement System of the State of Illinois has approved two real estate investments totaling $187.5m (€127.4m) which contribute to the acquisition of office space.
The pension fund made a decision at its board meeting on December 6 to invest a further $50m to a separate account relationship with KBS Realty Advisors, as the fund is pleased with the manager’s investment performance and ability to find and execute transactions in a tough market.
The separate account’s strategy is to pursue specialty investments, but is primarily focused on the acquisition of value-added office buildings in major metropolitan areas across the US.
Current market value of Illinois Teachers’ assets managed by KBS was $460m to the end of June 2007.
The relationship between Illinois Teachers and KBS is a non-discretionary one which means the real estate manager has to seek approval from the pension fund before a transaction can be closed.
Illinois Teachers has also setup a joint venture with CBL & Associates Properties, with the assistance of its separate account manager Commonwealth Realty Advisors, to acquire a portfolio of retail and office buildings in North Carolina - a deal which includes two retail properties and six office buildings.
The pension fund believes this venture allows it to invest in a high quality portfolio quickly, whereas it would otherwise have taken it years to assemble this kind of portfolio on its own.
Total size of the deal is $356.6m, including $81.6m in financing. The remaining $275m is equity split 50/50 between the two companies, giving both firms equal ownership.
Cap rate on the deal is 7.1%, based on the net operating income in the properties at the time the deal was closed.