The Teacher Retirement System of Texas is providing cornerstone investment for Madison International Realty’s new core real estate fund.
The US pension fund told IPE Real Assets that it is committing $200m (€163m) to Madison International Prime Property Investor Series 1, a limited partnership seeking to raise up to $1bn.
Ron Dickerman, founder of Madison International, said: “We are thrilled to have Texas Teachers in the partnership. We look forward to growing this partnership over the next several years.
“We could see it having total capital commitments from other major institutional investors growing to somewhere in the range of $600m to $1bn.”
The fund will continue Madison International’s strategy of acquiring stakes in real estate assets, but will focus on office, retail, industrial and residential assets in gateway markets and “24-hour” cities in the US
In 2016, the fund manager raised $1.4bn for its latest global fund, and last year co-invested in Berlin’s €1.1bn Sony Center alongside Oxford Properties, the global real estate arm of the Ontario Municipal Employees Retirement System (OMERS).
Investments for the new fund will be made with 40-50% leverage. Stakes will range between 25% to 75%.
Asked whether there was a risk in investing in core real estate when prices were or near the peak, Dickerman said: “While we are aware that there might be a value correction coming for core assets, we also believe that the core assets we will be investing in will also recover their values faster than will other types of real estate”.
Texas Teachers also revealed it had approved another real estate investment. The pension is committing $200m to Square Mile Tactical Partners II-A, a special situations fund managed by Square Mile Capital.