UNITED STATES - The Teachers Retirement System of the State of Illinois is terminating separate account relationships with Commonwealth Realty Advisors and Stone Levy, and has asked Heitman to manage some of the assets instead.
Pension fund officials said Illinois Teachers altered its strategy in April 2008 in terms of what it wanted its real estate managers to be in the future, and decided it would prefer them to be more generalists rather than focus on a specific strategy or property type, as well as having a more international footprint.
The pension fund has subsequently selected Heitman to run a portfolio of 21 retail properties previously managed by Commonwealth, and which was worth $1.2bn (€942m) at the end of September 2008.
The separate account is the first time Heitman has had any kind of relationship with Illinois Teachers, but the real estate manager had conducted its due diligence on the portfolio even before it was awarded the account
There is a good chance some properties in the portfolio will be sold as Illinois Teachers is now over allocated to retail assets.
At the end of September last year, the pension fund had retail assets totaling 27.2% of its total real estate portfolio. The NCREIF Property Index has a retail component of 20.2%.
Illinois Teachers has also selected Cornerstone Real Estate Advisers to take over management of two hotel properties in the Stone Levy account; the Warner Center Marriott property in Woodland Hills, California, valued at $78m at the end of September 2008; and Wyndham Orlando Resort in Orlando, Florida, worth $130m and a property Illinois has held since 1988
Illinois Teachers is now considering its options on both the retail and hotel assets.