GLOBAL - The Teacher Retirement System of Texas has become the lead investor in the recently closed US Government Building Fund after Texas Teachers approved a $300m (€230.2m) allocation to the fund.

Texas Teachers officials said they decided to invest capital into the commingled fund because of its stable core assets and the fact it will be run by a strong management team.

The investment strategy for the fund is to buy existing office buildings that are leased to state and federal government-related tenants in the US.

The fund is being managed by USAA Real Estate Company. 

In November 2009, Texas Teachers and USAA formed a $222m separate account to buy core assets in the US.

The commitment by Texas Teachers represents 55% of the total capital raised by USAA ($546m) for the Government Building Fund.

USAA Real Estate made a $70m co-investment into the commingled fund, which had a total of five institutional investors.

The total capitalisation of the fund will be around $1bn, as the leverage placed on the commingled fund will not be more than 50%.

USAA has already bought some properties for the fund in the cities of Chicago, Sacramento and Richmond.

The real estate manager expects to hold about 10 properties in the fund, with the average deal in the neighbourhood of $120m.

USAA said cap rates on its deals would be in the range of 6.5% to 8%. 

The commingled fund has a three-year investment period to place the capital.
 

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