By Jon Peterson
As reported in December, California State Teachers Retirement System has sold the 277,030 square foot 180 Grand office building in Oakland for $61.3 million or $221 per square foot, according to an e-mail from the pension fund. The buyer of the property was San Francisco-based Ellis Partners.
The sale of this property allowed the pension fund to earn significant profit on the sale. CalSTRS wrote in an e-mail that it had acquired the property in 2004 for $46.7 million. The estimated equity multiple on the sale was 1.21 and the estimated IRR, net of fees was 2.69 percent, according to the pension fund’s 2014 fourth quarter real estate activity report.[contextly_sidebar id=”i4mbmW4wBZCgaTMnaAs6GTeKeHkPvZmi”]The cap rate on the sale was pegged at 5.5 percent as stated in an e-mail from the pension fund. This return is based on the property’s current net operating income.
CalSTRS wrote in an e-mail that the asset was deemed stabilized with it being near 90 percent occupancy and was sold at what it considered to be a market price. The pension fund declined to make any further comment as to why the property was sold at this time.
The pension fund had owned 180 Grand in a separate account relationship with CBRE Global Investors and GI Partners, as stated by the pension fund in an e-mail. This office building was considered a core asset for the fund. CalSTRS will continue to have this relationship going forward. CBRE declined to comment when contacted for this story.
CalSTRS has made a commitment into a new office building investment fund that will have the San Francisco Bay Area as one of its targeted markets. The pension fund will be investing a total of $250 million into the Beacon Capital Partners VII commingled fund. This will include $150 million placed directly into the fund and $100 million of capital to be used for co-investments on certain transactions that the fund completes.
A representative of Beacon Capital Partners declined to comment when contacted for this story.
The other targeted markets for Partners VII in the United States are Los Angeles, Seattle, Boston, Chicago, Denver, New York and Washington, DC.
San Francisco is a market that Beacon has been an investor in the past. According to its Web site, the real estate manager bought three assets in the region for Beacon Strategic Partners VI commingled fund. These were the 385,000 square foot 221 Main Street in San Francisco, the 444,000 square foot 888 Brannan Street in San Francisco and the 720,000 square feet Santa Clara Campus in Santa Clara.
The total capitalization for Partners VII figures to be in the neighborhood of $3.6 billion. This is based on the fund having a leverage limit not to exceed 65 percent, as stated in an e-mail from CalSTRS.
The pension fund had placed its commitment for Partners VII into its value-add sector of its real estate portfolio. The investor wrote in a public document that the commingled fund will acquire value-add office buildings in knowledge-based, supply-constrained U.S. markets to add value through capital improvements, repositioning and leasing.