By Jon Peterson
California Public Employees Retirement System has committed $600 million of equity into two partnerships that will invest capital into apartments on the West Coast. The pension fund, though its public affairs office, declined to comment on these actions when contacted for the story.[contextly_sidebar id=”EqWDRGSV37uGeRy8rvkjQZKKdZKAufjn”]The commitments are $400 million into the Institutional Core Multifamily Investors partnership and $200 million into the Pacific Multifamily Investors. Both of these commitments were announced by the pension fund under its delegated authority structure. This is where the investment staff of the pension fund can approve commitments with existing real estate managers that are under $1.5 billion without needing full board approval.
Institutional Core Multifamily Investors is a partnership between CalPERS and Atlanta-based Invesco Real Estate. The real estate manager also declined comment when contacted for this story.
This separate account relationship will be investing in core apartment complexes on major markets on the West Coast. This would include the San Francisco Bay Area, Southern California, Seattle and Portland.
In this instance, core properties in which Invesco will typically be investing are defined as apartments that are close to full occupancy and are less than 10 years old. The cap rates on these properties can be in the range of four percent to five percent.
CalPERS has an established leverage amount of 25 percent on its core portfolio. The plan is to maintain this amount of leverage on the separate account with Invesco.
The relationship with Invesco was first started in May of last year with a $250 million allocation from CalPERS. The first property to go into this relationship was in the San Francisco Bay Area. This was the $105.4 million acquisition of the 305-unit Avalon at Dublin Station I in Dublin.
This property fit many of the investment parameters of the partnership with CalPERS. The cap rate was in the low four percent range. The property was completed in 2008 and was 96.4 percent occupied at the time of the sale.
Pacific Multifamily Investors is a partnership with CalPERS and Palo Alto-based Pacific Urban Residential. This investment entity is planning to acquire primarily B quality developments. “For us, we quantify a B apartment as a property that is at least 10 years old. The properties that we are trying to buy are assets that need some capital to improve them, but not a tremendous amount of capital,” says Al Pace, co-founder and president of Pacific Urban.
The partnership between CalPERS and Pacific Urban was formed in January of this year. The pension fund made a $200 million initial commitment to the partnership.
The real estate manager has closed on three deals, and a fourth is on its way. “The properties that we have acquired so far have been located in Sunnyvale, Orange County, Portland and we are close to buying another asset in Southern California,” said Pace.
The markets that Pacific Urban is looking to buy properties in are Northern and Southern California, Seattle, Portland, Los Angeles, Orange County and San Diego.