Seeking Industrial and Commercial RE, CalSTRS Signs $1.15 Billion Joint Property Venture

(January 11, 2011) — The California State Teachers’ Retirement System (CalSTRS) has agreed to a $1.15 billion equity joint property venture with the Panattoni Development Company.

CalSTRS’ real estate portfolio dropped by 43% during the fiscal year that ended in June 2009, when it suffered the worst returns in its history. Real estate constituted 10.1% of CalSTRS’ portfolio as of June 30 2010, returning a negative 12.4% for the year. According to CalSTRS, its new focus will be on “core” real estate, or properties that are already occupied or have tenants lined up, as reported by The Sacramento Bee.

The recent venture represents renewed faith in real estate opportunities around the world. Denmark’s largest pension fund, ATP, has allocated a further $907 million to invest in real estate funds, joint ventures and club deals through its subsidiary ATP Real Estate. And the Canada Pension Plan Investment Board is leading a consortium that has offered to buy 100% of the assets of ING Industrial Fund, a move for CPPIB to gain access to high-quality industrial properties.

The CalSTRS venture, under the name PanCal, will invest in commercial and industrial properties in the United States and Canada. CalSTRS will own 93.7% and Panattoni will own the remaining, with the core assets of Panattoni’s contribution including a portfolio of 70 properties throughout the US.

“The PanCal JV accomplishes a lot for our firm,” Panattoni chairman Carl Panattoni said, according to Global Pensions. “First, it recapitalizes many of our existing projects. It also provides a significant source of capital with a great partner, permitting us to take advantage of the market opportunities that are presented to us.”