REAL ESTATE - The $96bn Teacher’s Retirement System of Texas has started its process of investing 3% or $2.88bn (€2.4bn) of its total assets in real estate.
Its initial investment was a $100m allocation into the BlackRock Diamond Fund. The pension fund will be looking at the GMAC Institutional Realty Partners II fund next month.
One of the big factors in making the first commitment is that the pension fund could go into the fund right away and get some diversified exposure from day one.
The Diamond Fund is an open-ended commingled fund. Many of the long established open-ended real estate funds have a waiting list for new investors. The time frame can be anywhere from four to 12 months.
The Diamond Fund has an existing portfolio of real estate that includes $250m of equity and a total capitalization of $700m. There are a total of 15 properties in the fund. They are a combination of office, industrial, retail and apartments spread out across the country.
The investment strategy for the Diamond Fund is to pursue value-added transactions. This means buying existing properties that can be improved through a renovation, repositioning or new management.
Investors in the commingled fund are projected to achieve a mid to high teens gross IRR. This return assumes a three- to seven-year holding period.
Texas Teachers now has total assets of $96 billion. Its communication manager Howard Goldman said: “The pension fund hopes that real estate will contribute favourably to overall trust fund diversification and provide equity like returns through capital appreciation.”
Texas Teachers works on its real estate program through its real estate consultant, the Cleveland-based Townsend Group.
