The California State Teachers’ Retirement System has approved investments totaling $400 million to three real estate investment funds as part of a larger strategy to allocate more money to conservative property holdings.
The pension fund has committed $175 million to the UBS Trumbull Property Fund, $100 million to the Principal U.S. Property Account and $125 million to the Lion Industrial Trust.
All three funds could be expected to invest in the Bay Area. UBS has a San Francisco office and Principal has identified coastal regions among its target locations. Clarion Partners, which manages the Lion Industrial Trust, recently acquired an industrial building in Tracy.
Under its new policy, the pension fund hopes to have 65 percent of its real estate in core, or conservative, properties. Through the end of June, the institutional investor had $5.7 billion, or 31 percent of its real estate in core-quality assets. That total should be increased a bit later this year when the pension fund completes a core separate-account manager search, for which as much as $1 billion has been allocated.
The pension fund’s real estate portfolio was valued at $18.5 billion as of June 30, 12 percent of its total plan assets of $154.3 billion.
In its last fiscal year, CalSTRS paid benefits of $9.4 billion to more than 852,000 members and beneficiaries.
The Trumbull Property Fund has total assets of $7.8 billion. For the most part it invests in office, industrial, retail and apartments but has the flexibility to invest in other property types such as hotels.
The U.S. Property Account is managed by Des Moines, Iowa-based Principal Real Estate Investors. It has assets of $3 billion. At least 85 percent of the assets are invested in stabilized institutional-quality office, industrial, retail, apartment and hotel assets. The fund looks for high-quality properties in major markets with attractive demographics in coastal regions.
The Lion Industrial Trust has total assets of $1.5 billion. It buys existing properties and invests in new development.
CalSTRS made the commitments based on the recommendation of its independent real estate fiduciary, Cleveland-based Courtland Partners Ltd. Courtland advises institutional investors including pension plans, endowments, corporations and financial companies at the building and portfolio levels. It also evaluates real estate operating companies and advises on manager and partner selection.