Texas teachers’ pension fund makes huge investment in international real estate

The $3B pension fund will invest over $500M with various real estate investment vehicles
May 18, 2019 11:00AM

Lone Star's John Grayken (Credit: Getty Images and iStock)

Lone Star’s John Grayken (Credit: Getty Images and iStock)

The Texas teachers’ retirement fund is betting big on the international real estate market.

The $3 billion Teacher Retirement System of Texas announced it will invest over $500 million with Dallas-based private equity firm Lone Star Funds, plus another $150 million for an infrastructure fund, according to IP&E Real Assets.

About $300 million will be invested into Lone Star’s Real Estate Partners VI fund, which is seeking $3 billion for property investments in Western Europe, North America and Asia. The pension fund will also invest $200 million into the firm’s Residential Mortgage Fund II, which will invest in the U.S. mortgage industry.

The pension fund will also invest about $10 million into CBRE’s French Logistics Feeder, another real estate investment vehicle. The pension fund last year committed over $100 million to the investment pool, according to IP&E.

On top of it’s real estate investments, the retirement system will inject $150 million into the Global Energy & Power Infrastructure Fund III.

American public pension funds have increased their real estate investments by a measure of six times between 2006 and 2016. [https://therealdeal.com/2018/11/26/public-pension-funds-looking-for-more-exposure-to-high-risk-real-estate/] The funds are now seeking riskier, more opportunistic real estate deals as a means of closing funding gaps.

Manhattan real estate has been a target of public pension funds, but the strategy has not been adopted by New York City’s retirement systems. Instead, the city invested $4 billion of its pension funds into climate change solutions. [IP&E Real Assets] — Joe Ward