Decision on Real Estate Investments

November 20, 2015

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 Constitution, Article VII, §5(f).

PREVIOUS BOARD ACTION: At the September 2015 meeting, the board approved the execution of agreement(s) with GreenOak Asia GP II, LP, necessary to make an investment commitment of up to $50 million in GreenOak Asia (USD) II, L.P., a U.S. dollar-denominated fund, subject to continued due diligence and negotiation of fund terms, and also, to approve the relationship between GreenOak and Hodes Weill Securities, LLC after determining it meets the standards of 19 TAC Chapter 33, Section(j)(5), which has been disclosed in writing, and authorization for contract execution by the commissioner of education.

The board also approved at the September 2015 meeting, a one-time waiver of the PSF Real Estate Investment Policy Statement and authorized an amount of up to $50 million, excluding reserves (whether for follow-up investments, expenses, or otherwise) for a potential real estate co-investment with an existing PSF investment manager.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: 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. 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 $2.1 billion during the 2016-2017 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: None.

OTHER COMMENTS AND RELATED ISSUES: None.

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