By Jon Peterson & Vladimir Bosanac
Little seems to stand in the way of the industrial commercial real estate market across the country, and investment dollars are still seeking opportunities in this space. In a sign that this trend will likely continue into the near future, one of the largest pension funds in the country, the California Public Employees’ Retirement System (CalPERS), is looking to invest some major funds into the sector.
CalPERS has awarded a major new commitment to a San Francisco Bay Area manager with experience in this sector. GI Partners, which is based in San Francisco and has five other offices in Greenwich, Conn., New York, Chicago, Scottsdale and Dallas, will be receiving $847 million from the pension fund for its CalEast Solstice investment vehicle, according to the pension fund in a board meeting document, which was reviewed by The Registry. This partnership will look to invest in industrial assets for the pension fund, although which specific regions of the country would be targeted was not mentioned in the board meeting document. GI’s investment focus is national, so the company may be looking for opportunities across the country.
The value of the portfolio for this relationship with CalEast is roughly $11.8 billion, and the partnership achieved a one-year total return of 54.4 percent, according to the pension fund’s documents.
GI Partners has a deep experience in the industrial market. The company, according to its website, also has a realized portfolio investment called STAG Industrial, which is a real estate investment company that owns and operates single-tenant industrial properties that are mission-critical to its in-place tenants, such as core manufacturing or distribution facilities. The profile of the properties has historically generated higher risk-adjusted investment yields for STAG due to market inefficiencies and credit misperceptions in the company’s target markets.
In addition to this opportunity with CalPERS, GI Partners will be receiving an additional $555 million allocation to its TechCore partnership. TechCore is a core investment vehicle actively investing in or owning technology-advantaged real estate in the United States, including data centers, carrier hotels, specialized technology corporate campuses, “Always On” facilities, and life sciences properties located in primary markets and leased to industry-leading tenants, according to GI’s website. Since 2012, TechCore has acquired 19 properties and invested in over 3.6 million square feet of stabilized core technology-advantaged real estate and continues to actively invest in this sector, the company stated.
These allocations, along with the $821 million the pension fund invested with Palo Alto-based Pacific Urban for an apartment fund and an additional $637 million it allocated to San Francisco-based DivcoWest for a life science partnership, show that strong interest from institutional investors for growth economy assets across the country continues unabated. It also shows that in 2023 these areas will likely see a number of transactions across a relatively broad spectrum of investment opportunities on the West Coast, which is rich in the property types these funds are seeking to add to their portfolios.