REAL ESTATE - The Teacher Retirement System of Texas made some real estate moves at its board meeting in the middle of September.

The fund has approved an investment of up to $100m into the Capmark Structured Real Estate Partners commingled fund. The pension fund took this action after a discussion with staff and its real estate consultant, The Townsend Group.

Rob Kochis is a principal with Townsend and works on the account for Texas Teachers. He said, “This is a commingled fund that gets the investor a higher return with less risk than a straight equity acquisition. It involves taking a mezzanine debt position in many transactions and puts the fund in the second position in a deal.”

Another positive is the fund sponsor. Kochis said, “Capmark Investments L.P. is affiliated with Capmark, a mortgage lending company that looks at deals that total $20 to $25bn annually. They see a lot of transactions that most other companies never get a look at.”

Capmark Investments is figuring that Strategic Real Estate Partners will be a $1bn commingled fund. It’s been projected that investors in the fund will achieve a mid teens net IRR in the range of 14% to 16%.

The commingled fund is a structured real estate fund. The majority of its activity will be in the four major property types of office, industrial, retail and apartments. Deals will be considered nationwide in the major metropolitan areas.

Texas Teachers also took its first step in becoming an investor in three open-ended commingled funds by being put on its approved list. This means the pension fund will go in as an investor in each fund and make an actual commitment in the near future.

The three funds that were selected are The Prime Property Fund offered by Morgan Stanley, The AMB Institutional Alliance Fund III managed by AMB Property Corp. and RREEF’s RREEF America REIT III.

These three commingled funds will give the pension fund more diversity in its portfolio. Prime Property Fund is a core commingled fund. AMB’s fund only invests in industrial properties. RREEF has a value-added strategy investing mostly in the four major property types.