Texas Teachers Commits to Three Emerging Managers

February 24, 2012 - San Antonio, TX

The $110 billion state pension plan has committed $15 million apiece to Admiral Capital and CityView's latest funds on behalf of its emerging manager programme. The pension plan also has committed $50 million to a fund by Hawkeye Partners that provides seed money to emerging managers.

The Teacher Retirement System (TRS) of Texas has allotted $80 million to three managers on behalf of its Emerging Manager Direct Program. Two of the commitments, made this quarter, were for $15 million each to CityView and Admiral Capital. The third contribution, made at the end of last year, was for $50 million to Hawkeye Partners, which provides seed money to emerging managers.

“These funds have great opportunities for strong returns for TRS,” said Stuart Bernstein, the investment manager at TRS who runs the programme. “They’ve got strong leadership and deep backgrounds within each of their areas.”

Launched in May, the Admiral Capital Real Estate Fund is seeking $250 million in equity commitments. Sources familiar with the situation have told PERE that Admiral Capital’s value-added vehicle is targeting office, hotel, multifamily and mixed-use properties in major US metropolitan areas where there’s job growth. The fund was launched with $100 million in initial capital, $50 million of which came from the firm’s partnership with USAA Real Estate, a San Antonio-based financial services firm serving as the fund’s co-sponsor. Sources said the fund anticipates a final close by the end of the summer

One aspect of the Admiral Capital Real Estate Fund that appealed to the $110 billion pension plan was that 10 percent of the firm’s carried interest and management fee income is donated to charity and other non-profit community organisations. “One of the cornerstones of Admiral is they participate in the communities that they invest in,” Bernstein added.

Admiral Capital’s fund already has invested in six transactions, including a hotel in Houston, a mezzanine loan on a Chicago hotel, a performing note on a Las Vegas hotel, two Austin-based offices and one office in El Segundo, California. The commitment from TRS is Admiral Capital’s first equity commitment from a public pension plan. Admiral Capital declined to comment.

The other $15 million commitment from TRS went to CityView's real estate fund, Southwest Multifamily Partners. The Los Angeles-based firm, which is targeting $200 million in equity commitments for the multifamily vehicle, is working closely with Lincoln Properties to execute its strategy. TRS saw the CityView commitment as a good way for the pension plan to enlarge its footprint in the multifamily space, Bernstein noted.

In addition to the commitment from TRS, CityView’s fund received a commitment of $25 million from the Teachers’ Retirement System of Illinois late last year. A first close of $50 million is anticipated to occur soon, according to sources. CityView declined to comment.

These commitments follow TRS contributing $50 million to Hawkeye Partners in December. The Austin-based manager is targeting $1 billion in equity for its Hawkeye Partners Scout Fund II, which looks to foster and invest in emerging managers. Fund II plans to provide seed capital for somewhere between five and eight managers.

“Our main goal is to help, develop and create emerging managers, and Hawkeye is doing just that,” said Bernstein. Hawkeye officials declined to comment.

About USAA Real Estate Company

USAA Real Estate Company, with approximately $12 billion in assets under management, provides co-investment asset management services to U.S. pension funds as well as foreign and domestic institutional investors. USAA Real Estate Company also provides capital to partners for development. The portfolio consists of office, industrial, multi-family, retail and hotel properties as well as investments in real estate operating companies. USAA Real Estate is a subsidiary of USAA, a leading financial services company, serving military families since 1922. For more information, visit www.usrealco.com.