CalSTRS increases real estate investment by another $775m

NORTH AMERICA – The California State Teachers Retirement System has approved $775m (€570m) in new real estate investments, with all of the commitments being value-added or opportunistic funds or joint ventures.

The pension fund allocated €64m to the Frogmore Real Estate Partners III commingled fund, from which it expects a gross return of 15-18%.

Frogmore Real Estate Fund Managers is targeting a total equity raise of $350m. 

The fund aims to invest across all property types in income-producing assets and redevelopment in the UK.

CalSTRS participated in Frogmore’s two previous commingled funds, making a $27m allocation to Frogmore Real Estate Partners in 2006 and $32.5m for Frogmore Real Estate Partners II in 2009.

With its most recent additions to the real estate portfolio, the pension fund also established a new relationship, making an opportunistic, $200m investment in the Secured Capital Real Estate Partners V. 

The strategy for this fund is to invest in a diversified portfolio of distressed real estate debt and portfolios of loans secured by commercial or residential real property, primarily in Japan. 

Secured Capital Japan is looking at a total capital raise of $1bn for this commingled fund.

One of the pension fund’s value-add commitments was a $150m allocation to the CenterCal joint venture, into which CalSTRS has now invested a total of $579m of equity.

Principal Real Estate Investors is the manager of the venture. 

The fund has adopted a build-to-core/acquisition strategy focusing on high-quality retail centres on the West Coast in the US. 

The transactions could include retail from a grocery-anchored shopping centre to a regional mall.

CalSTRS said the return requirements for the JV were in the range of 8% to 12%. 

Most of the deals will be located in greater Los Angeles, San Francisco, Portland and Seattle areas.

The other three new commitments were $50m into Brookfield US Multifamily VA Fund II, $75m into IHP Capital Partners VI and $200m into Star Real Estate Fund III.

CalSTRS has a real estate portfolio valued at $22.2bn, as of the end of September. 

This covers 12.92% of its $172bn of total plan assets. 

The pension fund has an 11% targeted allocation for real estate, with a range for the asset class of 9-15%.