TCRS Doubles Down on Global Real Estate, U.S. Industrial

By Mario Marroquin

The investment committee of the Tennessee Consolidated Retirement System this week approved two real estate investments and the transfer of ownership of a multi-family asset in a thriving suburb of Denver.

Following the recommendation of JP Rachmaninoff, director of real estate at TCRS, and Matthew Haitas, senior portfolio manager, the investment committee voted to allocate $150 million to Blackstone Real Estate Partners X Fund and $100 million to EQT Exeter Industrial Value Fund IV.

Rachmaninoff and Haitas, who noted the allocation marks the third investment in funds managed by Blackstone, said they expect a net internal rate of return exceeding 13% from the EQT Exeter fund and 16% from Blackstone’s real estate fund.

Haitas noted TCRS previously invested in two funds managed by Exeter, which was later acquired by EQT in 2021. 

Haitas also recommended TCRS seek a buyer for its position in an apartment complex in Englewood, Colorado. TCRS invested $74.8 million towards the acquisition of the Kent Place apartment complex in the Denver suburb in 2017 following the recommendation of Haitas, but the manager said the operating performance was disappointing. Rent growth was slower than that of the average in the Denver metro, he said, which, according to brokerage firm Colliers, climbed by 11% on average on a year-over-year basis in Q1 2022.  

The Kent Place complex consists of 300 units which are part of an 11.5-acre mixed use development by Regency REIT and Continuum Partners that opened in 2011. The site is anchored by a King Soopers grocery store, is near two country clubs and is approximately 9.5 miles from downtown Denver.

Brokerage firm Colliers, citing figures sourced from CoStar, said in its Q1 2022 multi-family report for Denver that the Englewood/Littleton area saw a 14.8% year-over-year market rent growth in Q1. The brokerage reported a vacancy rate of 5.3% for the submarket and said an estimated 468 units are under construction.

Colliers said 23,627 units are under construction in the Denver metro area while the multi-family rental rates overall increased by 11.1% on a year-over-year basis.

TCRS, which manages $65.8 billion in assets, listed a target allocation towards real estate of 10% and an expected 4.32% long-term real rate of return for the asset class at the end of the system’s fiscal year ended in June 2021.

The fund listed an estimated fair value of $5.1 billion in investments in real estate at the end of FY 2021.