UNITED STATES - Teacher Retirement System of Texas has approved a commitment of $150m ($101.4m euros) into the Stratford Land Fund III commingled fund, as there is now less appetite for building physical developments.
Rob Kochis, principal with Townsend, the consultant assisting Texas Teachers, said the pension fund has made its move because there are fewer US developments planned at present, and is likely to be the case for the next couple of years so the smarter move is to invest in land which may later be considered for development.
"It's our view that this commingled fund is a good contrarian investment for the pension fund. Now is the right time in the investment cycle to be buying and banking land."
The theory is land will be more valuable in the future, once there will a fresh call for commercial and apartment projects.
This is Stratford's first effort at raising capital only from institutional investors but another possible investor being mooted is the Los Angeles Fire & Police Pension System.
Projected total equity raise for the commingled fund is $300m while Stratford intends to co-invest 10% of the total equity raise.
Assets will then be used to acquire parcels of land and take them through the approval process, adding value by securing zoning, land use permits and public road fundings, so land can then be sold to office, retail and apartment developers over a three-to- five-year process.
Targeted regions include Raleigh and Durham in North Carolina, Atlanta along with major markets in Texas and Arizona.
At the same time, Texas Teachers has also made a $150m commitment to the RLJ Real Estate Fund III - a $1bn hotel commingled fund managed by RLJ Development LLC which is projected to achieve a gross levered annual IRR of 18%.
The fund will be investing in Marriott and Hilton-branded hotels around the US, in urban and dense suburban markets.
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