TRS Texas | Pension360

Texas Teachers Pension Forms $450 Million Residential Real Estate Venture

The Teacher Retirement System of Texas is entering a joint venture with Camden Property Trust that will invest $450 million in U.S. residential real estate.

The US pension fund is investing in Camden Property Trust’s Multifamily Fund III vehicle, supplying $144m in equity.

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Ric Campo, chairman and chief executive at Camden, said there were “many value-add opportunities in the US”.

“We could buy existing properties we can renovate and improve, and we could also develop new properties,” he added.

Targeted returns for the investment fund are a 12% net IRR, with a maximum 60% leverage component.

Camden has full investment discretion on the fund, which will last until 2026.

Targeted markets will include Texas, Georgia, North and South Carolina, Washington, DC, and Florida, as well as Southern California, Phoenix and Denver.

Most of the transactions will be with properties of around 250 units and in the investment range of $40m to $50m.

Camden and Texas Teachers also agreed to extend the life of the Camden Multifamily Value Fund I and II by nine years.

“The properties in the funds have moved from a value-add to its current status of a core asset,” Campo said.

“We and Texas Teachers are enjoying the cash flow these properties are producing.”

By increasing the life of the two funds from 2017 to 2026, investors will have “much more flexibility” to sell the assets, which have a gross market value of $1.1bn, Campo added.

The funds own 22 communities totalling 7,278 apartment units in a variety of US markets.

Ownership is split 68.7% to Texas Teachers and 31.3% to Camden.

TRS Texas manages $126 billion in assets.

Texas Pension Accounting Tweak Will Shift Debt to Schools, If Only Symbolically

In light of newly adopted GASB accounting rules, the Teacher Retirement System of Texas in 2015 will require school districts, colleges – and any other government entities that pay into the system – to declare their employees’ pension liabilities on their books.

From the Killeen Daily Herald:

School districts across the state will soon have more debt listed on their general fund balances and teachers could see a smaller paycheck…

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“TRS does not want to put this liability on their books so they are taking the allocation to the districts and the cities and colleges and saying, ‘You record this amount; I’ll record this amount,” said Dane Legg, a partner at Lott, Vernon and Company PC, the Killeen Independent School District’s external auditing firm.

Legg reviewed the upcoming financial policy change with board members at their mid-December workshop.

In laymen’s terms, this means Killeen ISD will have to show a $48 million liability in its budget for about 28 years, the amount TRS said it owes toward Killeen ISD employees’ pensions.

The liability stems from the TRS Trust Fund, which is underfunded but will be fully funded in 28 years.

“It’s not set in stone — that number has not been set yet — but this was what they were charged to do to give people a heads up and go ahead and come up with their best guess,” Legg said.

TRS is $28.9 billion underfunded statewide, Legg said. And officials expect many government entities will take issue with the new GASB 68 policy because it will force some of them to look like they are in debt.

“TRS determines how that liability gets allocated by the district, and TRS is only taking a small piece of that $28 billion, and they are giving most of the rest to the district to record,” said Megan Bradley, the chief financial officer for Killeen ISD.

The district will not have to fund the liability, it will simply be a book entry, Legg said. TRS will fund it, however, by changing its member contribution rates and possibly the district’s match rate.

The Teachers Retirement System of Texas managed $124 billion in assets as of the end of 2013.

Photo by www.SeniorLiving.Org

Texas Teachers Pension Invests $200 Million in Automotive Real Estate

The Teacher Retirement System of Texas (TRS Texas) has committed $200 million to a fund that invests in car dealership properties.

From IPE Real Estate:

The pension fund is investing in the $651m BSREP CARS Co-Invest Pooling, a vehicle set up by Brookfield to invest in Capital Automotive, which provides real estate financing for car dealerships.

The commitment by Texas Teachers was one of several from institutional investors and will amount to 30.5% of invested capital in the vehicle.

Brookfield Strategic Real Estate Partners Fund provided most of the capital for the joint venture. Brookfield declined to comment on how much capital it has invested. Additional capital came from BSREP CARS.

Capital Automotive, which has invested $4.3bn in 440 US facilities and has a 16.3m sqft portfolio in 35 US states, typically provides real estate financing for automotive dealers to either acquire new locations or upgrade existing operations. The firm was previously owned by DRA Advisors.

Texas Teachers made the investment for its ‘special situations’ portfolio, a new category it created within its real assets portfolio for investments outside traditional core, value-added and opportunistic classifications.

TRS Texas manages $124 billion in assets and is the sixth-largest public pension fund in the United States.

Photo by Billy Wilson 2010 via Flickr CC License

Texas Fund Cuts Hedge Fund Allocation By 1 Percent

The Teacher Retirement System of Texas, one of the largest pension funds in the country, announced Thursday it would cut its allocation to hedge funds by 1 percent. It also changed its target allocations for equities and bonds.

Reported by Bloomberg:

The board of the $126 billion Texas system approved the change today following an asset allocation study, Howard Goldman, a spokesman, said by e-mail. Texas will reduce hedge funds to 8 percent of the pension from 9 percent, according to board documents.

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Besides reducing its bet on hedge funds, the Texas pension lowered the portion of assets it gives to equities by 4 percentage points and to fixed-income securities by 2 percentage points, while adding 5 percentage points each to risk parity and private markets, according to board documents. Risk parity is a strategy for investing based on allocation of risk and private equity and real assets.

“These new allocations are expected to be funded from a diverse set of asset classes across the trust in order to increase the overall probability that TRS will be able to achieve the 8 percent actuarial return target,” according to a statement provided by Goldman.

TRS Texas is approximately 80 percent funded. It is the sixth-largest public pension fund in the United States.