January 2019 Committee on School Finance/Permanent School Fund Item 9
Decision on Real Estate Investments
February 1, 2019
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 and consider possible real estate investments.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§43.003, and 43.007 and the Texas Constitution, Article VII, §5(f).
TEC, §43.003, outlines the types of investments that the State Board of Education (SBOE) may make with the Permanent School Fund.
TEC, §43.007, authorizes the SBOE to make transactions in the investment portfolio of the Permanent School Fund.
The Texas Constitution, Article VII, §5(f) authorizes the SBOE to acquire, exchange, sell, supervise, manage or retain investments of the Permanent School Fund and establishes the prudent person investment practice.
The full text of statutory citations can be found in the statutory authority section of this agenda.
PREVIOUS BOARD ACTION: At the September 2018 meeting, the board approved:
• execution of agreement(s) with Madison Realty Capital Debt Fund IV GP, L.L.C., necessary to make an investment commitment of up to $100 million in Madison Realty Capital Debt Fund IV, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education.
• execution of agreement(s) with EPISO 5 (GP) S.A.R.L., necessary to make an investment commitment of up to €75 million in European Property Investors Special Opportunities 5 SCSp, subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education;
• execution of agreement(s) with TPG Real Estate GenPar III, L.P., necessary to make an investment commitment of up to $75 million in TPG Real Estate Partners III, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education; and,
• execution of agreement(s) with PAG Enhanced Credit GP II Limited., necessary to make an investment commitment of up to $100 million in PAG Enhanced Credit Fund II, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education.
BACKGROUND INFORMATION AND JUSTIFICATION: At the May 2008 meeting, the board selected Courtland Partners as the Permanent School Fund’s real estate counsel to provide the expertise and advice related to the investment strategy of the real estate portfolio for the Permanent School Fund. 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. At the July 2016 meeting, the board approved an increase in the allocation to 10%.
PUBLIC 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.
PUBLIC COMMENTS: None
Staff Members Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund
February 1, 2019
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 and consider possible real estate investments.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§43.003, and 43.007 and the Texas Constitution, Article VII, §5(f).
TEC, §43.003, outlines the types of investments that the State Board of Education (SBOE) may make with the Permanent School Fund.
TEC, §43.007, authorizes the SBOE to make transactions in the investment portfolio of the Permanent School Fund.
The Texas Constitution, Article VII, §5(f) authorizes the SBOE to acquire, exchange, sell, supervise, manage or retain investments of the Permanent School Fund and establishes the prudent person investment practice.
The full text of statutory citations can be found in the statutory authority section of this agenda.
PREVIOUS BOARD ACTION: At the September 2018 meeting, the board approved:
• execution of agreement(s) with Madison Realty Capital Debt Fund IV GP, L.L.C., necessary to make an investment commitment of up to $100 million in Madison Realty Capital Debt Fund IV, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education.
• execution of agreement(s) with EPISO 5 (GP) S.A.R.L., necessary to make an investment commitment of up to €75 million in European Property Investors Special Opportunities 5 SCSp, subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education;
• execution of agreement(s) with TPG Real Estate GenPar III, L.P., necessary to make an investment commitment of up to $75 million in TPG Real Estate Partners III, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education; and,
• execution of agreement(s) with PAG Enhanced Credit GP II Limited., necessary to make an investment commitment of up to $100 million in PAG Enhanced Credit Fund II, L.P., subject to continued due diligence and negotiation of fund terms, and authorization for contract execution by the Commissioner of Education.
BACKGROUND INFORMATION AND JUSTIFICATION: At the May 2008 meeting, the board selected Courtland Partners as the Permanent School Fund’s real estate counsel to provide the expertise and advice related to the investment strategy of the real estate portfolio for the Permanent School Fund. 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. At the July 2016 meeting, the board approved an increase in the allocation to 10%.
PUBLIC 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.
PUBLIC COMMENTS: None
Staff Members Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund