REAL ESTATE - The Teacher Retirement System of Texas has approved three investments in real estate commingled funds totaling $300m. The pension fund took these actions at its board meeting earlier this month.
The three investments are up to $75m to the MacFarlane Urban Real Estate Fund II, up to $150m for Carlyle Realty Partners V and up to $75m to CPI Capital Partners Europe. The pension fund made these decisions along with the assistance of its real estate consultant, The Townsend Group.
Texas Teachers chose these investment funds for several reasons. The pension fund is hoping that these investments will provide excess returns above the adopted benchmark, diversification within the real estate and total portfolio and enhance the overall return of the institutional investor.
MacFarlane Partners is the real estate manager for Urban Real Estate Fund II. This is a commingled fund that will be investing in urban real estate across the United States. This will include retail, residential and mixed-use projects.
The real estate manager is still raising capital for the fund. There is a chance that the fund could be closed before the end of the year. The potential return for investors is a leverage IRR in the range of 16% to 18%.
Carlyle Realty Partners V is structured as a real estate opportunity fund. Most of the deals for the fund will be located in the United States and Canada. Investors in the fund are projected to achieve a gross IRR of 18% to 20%.
Carlyle Realty Partners is the manager of the commingled fund. It will be investing in a variety of property types. This includes the four basic food groups of office, industrial, retail and apartments. There also will be some specialized property types like senior living and for-sale residential.
CPI Capital Partners Europe is an investment fund focusing on assets that are located in Pan-European markets. Investors in the fund are projected to get a net IRR of 18%.
This will be only the second time that Texas Teachers has invested in a commingled fund with an international real estate strategy. The other investment fund was PLA Retail Fund I managed by Pramerica Real Estate Investors. The pension fund made a $50m commitment to this fund in July. Its strategy is to invest equity in new retail developments in Mexico.
