CalSTRS Commits $290 Million to European Real Estate Funds

CalSTRS has committed $293 million to two funds that invest in European real estate. The moves are part of the pension fund’s planned third quarter real estate commitment of $900 million.

Details on the investments from IPE Real Estate:

Commitments of $200m and €75m were made to TCI Fund Management’s Real Estate Partners Fund I and Meyer Bergman European Retail Partners, respectively.

The investment in TCI Fund I, which invests in first mortgages backed by trophy assets in Western Europe and the US, has been placed into CalSTRS’s core portfolio.

CalSTRS said the assets backing the mortgages were the key appeal, alongside the income-producing potential of the strategy.

Net IRR for CalSTRS’s core assets is between 6% and 8%.

The commitment from CalSTRS represents 25% of TCI’s targeted $800m capital raise.

CalSTRS’s view that there is a strong market opportunity for European value-add retail was behind its decision to back Meyer Bergman.

The pension fund also cited a lack of available new development in Western Europe.

The fund will target Germany, France, the Nordics and the UK.

The two commitments, part of $900m approved for real estate during the third quarter, come alongside a $100m allocation to Pramerica Real Estate Investors’ PRISA II open-ended fund.

The $6.5bn fund has an income-generating core component and a non-core, build-to-core and lease-up component.

CalSTRS, with assets of $187 billion, is the second-largest public pension fund in the United States.

Photo by Stephen Curtin