REAL ESTATE - The Teachers Retirement System of Texas has approved investments totaling $175m into two commingled funds.
One of the investments was a $125m commitment to the Stockbridge Real Estate Fund II, L.P. The other was a $50m investment in the PLA Retail Fund I, L.P.
The fund manager on Stockbridge Real Estate Fund II is Stockbridge Capital Group. The total equity raise in the fund is in the range of $500m-$650m. Another large investor in the fund is the Pennsylvania Public School Employees Retirement System. This pension fund has agreed to invest up to $162.5m.
This commingled fund has an opportunistic investment strategy. It looks at a variety of property types including mixed-use, office buildings and housing. It will take a hard look at investing in assets along the East and West Coasts.
Pramerica Real Estate Investors is the fund manager of the PLA Retail Fund I. This commingled fund has a focused investment strategy. It will be investing equity in new retail development projects in Mexico. These developments range in size from 40 to 60 square meters. These projects would be anchored by three kinds of retailers. They are a grocery store, 12- to 16-screen theatre and a department store.
Texas Teachers considers the two commingled funds that it invested in as tactical investments. The pension fund expects that the returns on these funds to exceed the benchmark of NCREIF plus 200 basis points. The NCREIF Property Index had a total return of 3.6% in the first quarter and a rolling return for the year at 20.2%.
The pension fund will be placing capital into two kinds of real estate investments. It’s strategic plan calls for 60% of the assets to be in strategic investments and 40% in tactical investments.
Texas Teachers is hopeful that its real estate will provide many benefits for the pension fund. One is to deliver a return in excess of the NCREIF benchmark. This asset class can also achieve more diversification for the pension fund. This can be achieved by investing in a variety of property types and investment strategies.