April 2014 Committee on School Finance Permanent School Fund Item 9

Overview of the Real Estate Asset Class

April 11, 2014

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT

SUMMARY:
This item provides an opportunity for the committee and board to review the real estate policies, procedures and tactical plan. The committee may take action based on this information.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(f).

PREVIOUS BOARD ACTION: At the March 2009 meeting, the board approved the Texas Permanent School Fund Real Estate Investment Policy Statement. At the July 2013 meeting, the board approved an amended Real Estate Investment Policy Statement, including delegation of SBOE authority allowing the PSF to execute real estate co-investments and secondary investment with existing real estate managers, subject to the parameters and guidelines set forth in the Real Estate Investment Policy Statement, in order to enhance the risk-return profile of the PSF real estate investment program.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: At the May 2008 meeting, the board selected Courtland Partners as the Permanent School Fund’s real estate counsel. At the July 2012 meeting, the board set a strategic asset allocation which included an 8% allocation to real estate. Following the RFP process in July 2013, the board approved a contract to continue with Courtland Partners as the Permanent School Fund’s real estate counsel.

FISCAL IMPACT: The distribution of the Permanent School Fund is projected to be $1.677 billion during the 2014-2015 biennium.

PUBLIC AND STUDENT BENEFIT: The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.

PROCEDURAL AND REPORTING IMPLICATIONS: Not applicable.

PUBLIC COMMENTS: None.

ALTERNATIVES: No alternative actions are proposed regarding this item.

OTHER COMMENTS AND RELATED ISSUES: None.

Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund