UNITED STATES - Teachers' Retirement System of the State of Illinois is close to reaching its international real estate allocation as the fund has now approved a further three investments totaling $250m (€184m) into commingled funds.
Illinois Teachers has now invested $350m into international real estate but still has a small sum to go to hit its strategy of placing 10% of its total real estate portfolio - currently valued at $4.2bn to the end of May - in international funds.
Teachers intends to allocate 14% of its assets in real estate, but has so far only reached 10% as the fund is currently worth $41.8bn in total.
The pension has selected three funds considered to be either value-added or opportunistic funds targeting opportunities largely seen in Europe and Asia, particularly as the strategy in Western and Southern Europe at present is to acquire properties that are being sold by corporates and the public sector.
Some real estate managers have estimated over 50% of the transactions in the real estate investment market in Europe are being done by corporations and the public sector.
Likewise, Japan is a market experts believe is on the rebound and primed for future growth so this could lead to the development of new properties or the improvement of existing assets.
Illinois Teachers has placed a $75m commitment in the Carlyle Europe Real Estate Partners III fund, $75m with LaSalle Asia Opportunities Fund III and $100m into the Macquarie Global Properties Asia Fund III.
Potential returns range from a ‘mid-teens' IRR for the value-added fund to 20% gross IRR for the opportunity funds over a 3-7-year holding period.