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CalSTRS Forms 3 JVs To Pump $778M Into Apartments, Industrial

The California State Teachers’ Retirement System has formed three joint ventures to invest a total of $778B in U.S. apartments and industrial assets.

The move, along with a similar strategy by the California Public Employees Retirement System, further clarifies the West Coast institutional investors' reported deployment of more capital into real estate.

In the apartment market, CalSTRS, a pension fund with about $236.9B in assets, has formed a $250M JV with Waterton to buy core assets. Waterton, an active investor in the multifamily and hotel sectors, has formed other such JVs recently, and for similar reasons. 

Earlier this year, Waterton joined forces with Waterford Hotel Group to buy hospitality properties, with company officials saying the move is a way to prepare for a possible recession, provided the partners buy selectively.

CalSTRS has also partnered with Fairfield Residential in the residential market, investing $250M with a focus on affordable housing.

Earlier this year, CalSTRS acquired a 65% stake in Fairfield Residential from Brookfield Asset Management. Previously, CalSTRS had acquired a 25% stake in Fairfield.

“Transitioning to majority owner was appealing for a number of reasons, including the expansion of Fairfield’s geographic footprint and the growth of its capital base to include other like-minded investors,” CalSTRS Director of Real Estate Mike DiRé said when the deal was announced.

CalSTRS has also upped its game in the industrial sector with the formation of a JV with Principal Real Estate Investors, putting in $278M. The goal of the partnership is to invest in logistics properties with an unnamed operating partner.

CalSTRS has done well recently with its real estate holdings, enjoying a 9.9% return for that asset class over the last five years, and an 8.2% return for its fiscal year ended June 30, which was an overperformace of 170 basis points. The pension fund has about $32.5B in real estate assets, or around 13.6% of its holdings.