UNITED STATES - Teacher Retirement System of Texas may be one the of few US pension funds to make a major investment this as officials are thinking of investing $150m (€116.9m) in mezzanine debt.
A final decision is likely to be made in the near future about whether the pension fund should allocate the money to the Prudential Mezzanine Fund, according to
Texas Teacher's action is in stark contrast to many major US pension funds as officials have tended to concentrate on managing existing assets, especially as some plans have seen their total assets drop by as much as 30%.
But Rob Kochis, principal at real estate consultant, The Townsend Group, which advises the pension fund, said there are good reasons for looking at investment opportunities in debt.
"We do like investing capital into a debt strategy now. There is a lack of debt available in the marketplace now and a fund like this could fill in some gaps."
That said, the real estate consultant is not 100% sold on using Pramerica Real Estate Investors as a debt investor.
"There is a relatively new product type for them," said Kochis.
"This manager does not have the long track record it has for investing equity in real estate. And another concern for us is that all financial institutions are under financial stress given the current market conditions."
Pramerica is hoping to raise $500m through the mezzanine fund and most assets will then be invested in the US across the four main property sectors: office, industrial, retail and residential through mezzanine debt, preferred equity and senior mortgage positions.
Projected return for investors is in the region of a 10-14% net IRR, assuming a three- to seven-year holding period.