Updated June 27, 2014
By Jon Peterson
California Public Employees Retirement System has awarded an additional $20 million of equity to San Francisco-based Sack Properties as part of its emerging manager program known as, the Catalyst Fund.
The manager had received an initial $30 million allocation from the pension fund. While it had previously focused its investment strategy solely on Northern California, Sack is now getting close to completing its first deal in Southern California.
Sack’s strategy had been on buying apartments throughout Northern California with an emphasis on projects that have a strong value-add component. With the new allotment, it is now one of two managers that have an equity allocation of $50 million by the Catalyst Fund; San Francisco-based Rubicon Point Partners is the other company. It is planned that the equity would be used to acquire roughly $100 million worth of real estate with some leverage attached to the deals.
CalPERS has Los Angeles-based Canyon Capital Realty Advisors as the manager of the Catalyst Fund.
Another manager in the Catalyst Fund, the El Segundo-based Paragon Commercial Group, is now looking for its first deal in Northern California. “Though they have held a statewide mandate since joining the fund in 2013, they have, to date, invested [only] in Southern California. Paragon is presently seeking out its first transaction for this fund in Silicon Valley,” says, Vernon Chin, a vice president with Canyon Capital.
Canyon estimated that Paragon has been primarily focused on executing a retail strategy. “Paragon Commercial can invest in a wide variety of retail assets. This could be everything from a stand-alone 7/11 store to a grocery-anchored shopping center,” said Chin.
Two managers of the four in the Catalyst Fund that only can invest in one part of the state. The Los Angeles-based Pacshore Properties is one of them. It currently has a mandate to invest in office buildings in Southern California. The other is Rubicon Point Partners, which can only invest in Northern California. Its focus has been on buying a mixture of office, R&D and data centers.
The managers must get approval from Canyon on any property they buy before a closing can occur. CalPERS did allocate a total of $200 million of equity to the Catalyst Fund for an initial commitment. There is a chance that this could be increased in the future.
The pension fund has setup some requirements to be part of the emerging manager program. Any firm must have assets under management of $1 billion or less. These firms need to be in their first, second or third separate account or institutional fund. Their geographical focus needs to be in urban communities around California.