UNITED STATES - Teacher Retirement System of Texas has made one of the largest industrial acquisitions of the year by investing $410m (€292.8m) into TLF Logistics.
This transaction represents one of the biggest and most significant transactions to close by a pension fund in the US this year, largely because most pension funds have little capital to invest thanks to the denominator effect and are already above their targeted allocation to real estate.
Texas Teachers structured the deal as a 95/5% venture with the previous owner of the portfolio, ProLogis and the transaction now carries no debt.
The structure of the deal means Texas Teachers should get all of its capital back plus a 10% preferred return before ProLogis gets paid at all.
The purchase has been placed in the pension fund's core sector of its real estate portfolio and the hope is it will exceed historic core returns.
A portfolio purchase is often the only way large US pension funds can invest in industrial assets as it is very difficult to build up a sizeable industrial portfolio when many individual industrial properties are sold at around $10m each.
Texas Teachers completed the transaction through its separate account real estate manager, Stockbridge Capital; the first time that the two firms have closed a transaction together though the expectation is more will follow.
The pension fund had a real estate portfolio valued at $3bn by the end of March 2009 and was worth 4% of its total plan assets. The official goal is to raise the real estate holding to 5% of the portfolio by the end of the year though its long-term targeted allocation is 10% in real estate.
The pension fund had total plan assets of $83bn to 16 June 2009.