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The $21B Arkansas Teacher Retirement System is committing $150M to two U.S. real estate funds, betting that the commercial property market is nearing a turning point after two years of price corrections and higher interest rates.
ATRS approved a $50M commitment to Raith Real Estate Fund IV, an opportunistic fund targeting value-add industrial/logistics (35-45%) and multifamily assets (35-45%), along with acquisitions of office, hotel, or niche sector opportunities where distressed situations allow an attractive basis, according to materials from a recent board meeting. Raith will add value to existing assets through active management initiatives including renovation, leasing/re-leasing, and add-on development, though the fund manager may also acquire entitled land for purposes of “shovel-ready ground-up development.”
Asset locations include secondary and tertiary markets and deal size is generally focused on mid-market opportunities averaging $25M in equity. The Fund will utilize leverage up to 70% loan-to-value. Up to 30% of the fund may be allocated to development, outlined the pension’s staff in the meeting materials, and it is seeking net returns of 12–14%. Past vintages typically saw internal rates of return of 12%.
ATRS also committed $100M to Realty Income Corp.’s U.S. Core Plus Fund, a new open-end vehicle focused on stabilized retail and industrial assets. The fund will be managed by Realty Income’s in-house team, leveraging its national scale and expertise in triple-net leased properties.
ATRS characterized the strategy as a compelling, risk-adjusted opportunity with targeted net returns of 9–11% and that aims to provide steady income and downside protection amid macroeconomic uncertainty.
These moves come as allocators slowly return to real estate, encouraged by signs of a soft landing for the U.S. economy. According to the NCREIF ODCE Index, capital flows remain net negative, with $30B in outstanding redemption requests as of Q2. However, the Federal Reserve has adopted a more dovish tone, and the 10-year Treasury yield has held at 4.2%, narrowing spreads and increasing clarity around valuations.
“Valuations are nearing a bottom,” wrote MSCI Real Assets in its August 2025 report, citing minimal cap rate expansion and modest improvement in NOI forecasts across property types, particularly apartments and retail.
By pairing a tactical allocation to opportunistic strategies with a long-term position in core-plus assets, ATRS appears to be hedging macroeconomic risk while positioning for eventual recovery in both pricing and capital markets. The commitments also reflect broader investor interest in sectors with durable cash flow characteristics and potential for post-correction appreciation.
