New York State Teachers’ Retirement System is considering offloading a portion of its real estate portfolio.
Many LPs have considered selling down their private markets holdings as a way to generate liquidity from their portfolios in the sluggish exit environment. New York State Teachers’ last year completed the sale of a $6 billion private equity portfolio.
Now the $138.5 billion system is looking to shop a chunk of its real estate portfolio, according to an investment staff member who spoke at the pension’s 24 January board meeting. Affiliate title Buyouts watched a broadcast of the meeting.
New York State Teachers’ was working with different brokers and advisers to explore the secondaries sale, according to the staff member, who added that real estate discounts were “generally” 20 percent.
According to a spokesperson, New York State Teachers’ is considering a secondaries sale as its real estate portfolio remains overweight to its target allocation, leading to system considering various liquidity options.
“We are very early in the process to explore pricing for equity real estate commingled funds on the secondary market as a portfolio management tool,” the spokesperson said.
The potential size of the portfolio or specific funds have not yet been determined. The system is also not considering issuing an RFP to hire a broker for the sale at this time, teh spokesperson said.
In the past, the system has worked with Mozaic Capital on its private equity secondaries sales.
According to Buyouts’ data, New York State Teachers’ real estate portfolio is valued at $16.7 billion. The system has an 11 percent target to real estate with an actual allocation of 12.1 percent as of the end of December.
The completion of the private equity portfolio’s sale already had a significant impact on the system’s rebalancing efforts, according to Gerald Yahoudy, New York State Teachers’ managing director of private equity.
According to Yahoudy, the system currently allocates 9.5 percent of its portfolio to private equity, near its 9 percent target. At the end of September, the system allocated 12 percent to private equity.
While part of the reduced allocation was due to the climb of the public market, the secondaries sale also contributed, Yahoudy said.
“We’re very happy about the transaction and it puts us in a better place,” Yahoudy said.
– This report was updated with a spokesperson’s comment from NYS Teachers.