CalSTRS Makes $200MM Commitment into DivcoWest Fund

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CalSTRS California State Teachers Retirement System DivcoWest Fund V San Francisco Bay Area Bard Consulting Oregon Public Employees Retirement Fund

By Jon Peterson

California State Teachers Retirement System has approved a $200 million commitment into the DivcoWest Fund V commingled fund, according to a document from the pension fund.

San Francisco-based DivcoWest Properties declined to comment when contacted for this story.

[contextly_sidebar id=”maK0swhriabaqmwAH8I8uwB9OdmpGqyy”]CalSTRS made the investment based on the recommendation of the pension fund’s independent real estate fiduciary, San Francisco-based Bard Consulting. The commitment by the pension fund will give the investor a 13 percent ownership in the commingled fund as the targeted capital raise for the commingled fund is $1.6 billion. A final close on the capital raise is projected to happen sometime in 2016.

The commitment by CalSTRS is the latest example of DivcoWest attracting capital from large public pension funds. Commitments earlier this year came from Oregon Public Employees Retirement Fund for $250 million and $200 million from Teacher Retirement System of Texas.

The commitment for Divco’s Fund V was placed in CalSTRS’ value-add sector of its real estate portfolio, which at the end of June 2016 was valued at $13.8 billion. The pension fund ourlined in a report that it intends to make investments in real estate opportunities in targeted markets that focus on office and research & development properties.

The investment focus for the fund will zero in on assets located in a few select markets around the country. Two of these will be in the San Francisco Bay Area and Seattle. Others would include Boston, Austin and Washington, D.C.

The targeted returns for the commingled fund are a net IRR of 10 percent to 13 percent. The leverage placed on the commingled fund will be somewhere close to 65 percent.

The investments for Fund V will involve a combination of buying existing assets that DivcoWest can improve and putting equity into new development projects. The long-range plan for the assets is to get them to stabilization and then sell them to capital sources looking for core assets. The improvements made to the existing properties would include leasing up the empty space, a recapitalization or adding new management techniques. These assets would likely attract a mixture of tenants that include technology and media-related companies.

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