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CalSTRS inks $200m RE debt JV

The pension system is investing with a startup, but it has a long history with one of the firm’s founders.

The California State Teachers’ Retirement System is betting on real estate debt with a potential commitment of up to $500 million to the strategy, the pension system said this week.

CalSTRS has set aside $200 million for a joint venture with lending firm 3650 REIT, with potential for $300 million more in equity, Real Estate Capital’s sister title, PERE, reported. The JV targets loan originations to well-capitalised sponsors with properties in US metropolitan markets where 3650 REIT has a presence. The loans could back ground-up construction, recapitalisations, acquisitions and repositionings.

Miami-based 3650 REIT was founded in April by a trio of real estate veterans: Jonathan Roth, formerly the president of Canyon Partners, a longtime CalSTRS general partner; Toby Cobb, previously co-head of US commercial real estate at Deutsche Bank; and Justin Kennedy, formerly Deutsche’s global head of real estate capital markets. Cobb and Kennedy were also co-chief executives of special servicer LNR Property, purchased by Starwood Capital Group in 2012.

A spokesman for 3650 REIT declined to comment on the JV.

Mike DiRé, CalSTRS’ head of real estate, highlighted the pension system’s familiarity with Roth, who it worked with for over a decade during his time at Canyon.

“Because of our relationship with him and the team he and his partners have assembled, we’re confident that our new joint venture will bring the returns we expect,” DiRé said in a statement.

PERE understands the JV is targeting net returns in the high single digits to low double digits. The venture has not yet deployed capital but expects to close on about $300 million worth of deals by year-end.

Last year, CalSTRS inked another real estate debt JV for a similar figure when it committed $495 million to long-time partner PCCP for core-focused PacificCal Debt II, according to the pension’s meeting materials.

CalSTRS managed $28 billion in real estate as of March 31. Its staff oversees $18.1 billion in control positions – which includes joint ventures, separate accounts and open-end funds – and $6.8 billion in non-control positions, which includes closed-end funds and co-investments.

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