CalSTRS Buys into LCOR

CalSTRS, the California teachers’ pension, is buying the majority stake in LCOR, a real estate management and investment company. The transaction is valued at $800 million and the pension has plans to expand some of the company’s projects.

PRESS RELEASE:

BERWYN, PA – The California State Teachers’ Retirement System (CalSTRS) has acquired a majority interest in LCOR, a leading real estate investment, management and development company, in combination with extensive real estate holdings owned by LCOR’s former partner, Lehman Brothers. The transaction, completed in partnership with LCOR management, values the LCOR operating company and the related real estate at greater than $800 million.

Along with LCOR’s real estate operating and development businesses, in which the Berwyn, Pa.-based company manages more than 7,400 multifamily units, 7.7 million square feet of commercial space, and a substantial development pipeline of mixed use real estate, the Platform is acquiring ownership stakes in 14 multifamily assets comprising nearly 5,000 apartment units. CalSTRS anticipates expanding the LCOR relationship with additional investments in future development and redevelopment of multifamily and commercial real estate assets, broadening its holdings of stable, high quality real estate in the Washington, D.C. to New York City corridor.

“We are extremely pleased to partner with such a quality company of experienced real estate professionals, and look forward to capitalizing on the substantial growth potential of this enterprise,” said Timothy Works, CalSTRS’ Portfolio Manager overseeing the new venture.

Peter DiLullo, LCOR’s President and Chief Executive Officer, adds, “LCOR has enjoyed a longstanding relationship with CalSTRS in an existing multifamily partnership, and we are looking forward to furthering our business together in this new venture. Our partnership with CalSTRS provides a solid foundation for growing our portfolio and executing on well-positioned, complex development opportunities, a business in which we have excelled over the last 30 years.”

Among the assets included in the transaction are 308 apartment units at 25 Broad Street in Lower Manhattan, New York, 462 units in Greenwich, Connecticut, as well as assets in Aventura, Florida and Tysons Corner, Virginia. Key development pipeline opportunities include transit oriented, high-growth locations in Tysons Corner, Virginia; Montgomery County, Maryland; Hoboken, New Jersey; and Lower Manhattan.

“We are eager to expand our CalSTRS relationship from one that was strictly centered on residential assets to one that now includes every aspect of our business,” DiLullo added. “At the same time, it is with fond memories that we exit a successful 14-year relationship with Lehman Brothers. They have proven to be a great partner in the best and worst of times.”

Morgan Stanley acted as the exclusive financial advisor to LCOR and Lehman in the transaction. CalSTRS was advised by Principal Real Estate Investors and GI Partners. GI Partners, a Menlo Park based private equity firm, will act as ongoing asset manager for CalSTRS’ interests in the platform, and affiliates of GI Partners have co-invested in the acquisition.

“This is an excellent outcome for these properties and for all of the constituents who will benefit, including our creditors. It is another successful example of our strategy to monetize assets that are stable and liquid, and to actively manage and invest in quality entities like LCOR when doing so can contribute significant added value,” said Jeff Fitts, Lehman’s head of real estate.

The California State Teachers’ Retirement System, with a portfolio valued at $153.7 billion as of April 30, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

LCOR is a fully integrated real estate company with offices in the New York City, Washington D.C. and Philadelphia areas. LCOR specializes in complex urban development, including large-scale multifamily residential, commercial and mixed-use properties that often integrate housing, office, retail and transit components, having developed more than 20,000 residential units and over 16 million square feet of commercial space. The company is also a pioneer and leader in public/private development, including government spaces, aviation facilities and infrastructure. Notable public/private projects include the U.S. Patent and Trademark Office Headquarters campus, JFK International Airport’s Terminal 4 and North Bethesda Center at White Flint Metrorail.

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