By Jon Peterson
Austin, Texas-based Employees Retirement System of Texas is proposing to consider to invest a portion of its real estate capital into real estate technology-focused venture capital part of its 2019/2020 investment plan for real estate, as stated by the pension fund in a board meeting document.
The investor wrote that “PropTech” and other real estate related, but not physical property, offerings are growing, intended to provide services and data utilization that can enhance traditional real estate returns and take advantage of disruptions in the traditional landlord/tenant relationship.
Once this type of investing is approved by the pension fund, it would then become part of its investment policy going forward. There was no information in the board meeting document about the level of capital the fund might be earmarking for this strategy in the future. One could expect that the investments made with this strategy would be done so with the assistance of a real estate manager, another venture capital fund in this space, and the staff at Texas Employees would also be involved.
The pension fund is planning that an investment made during the new fiscal year in real estate-focused technology venture capital would likely have a five-year average holding period. It assumes that the fund would not have much, if any, distributable cash flow during the hold period.
There was no mention in the document of which markets across the United States this capital might be invested. The markets of the San Francisco Bay Area and Seattle do have a history of attracting significant amounts of venture capital in general and may attract funding into companies looking to bring new products into this space.
Texas Employees has setup an overall real estate pacing plan for the new fiscal year at $650 million, as stated in its board meeting document. This amount will be comprised of $550 million allocated for non-core investing and $100 million for core investments. These investments will be made through the use of either smaller commingled funds with just a few limited partners, co-investments and separate accounts.