CalSTRS Sells Retail Asset in San Jose for $111MM

CalSTRS, San Jose, Hunter Properties, Cupertino, San Jose, commercial real estate news, Sacramento, San Francisco

villageoaks_july2014By Jon Peterson

California State Teachers Retirement System has sold the 320,000 square feet Village Oaks shopping center in San Jose. The pension fund sold the asset through Los Angeles-based PCCP. This real estate manager did not respond to phone calls when contacted for this story.

[contextly_sidebar id=”OBBNLVbMGlnX0dbPr5wvc7cTQBkOJWCB”]The pension fund stated in an e-mail that the institutional investor had owned the property in a joint venture with PCCP known as PacificCal IV. The development partner on the property was Cupertino-based Hunter Properties.

The property was sold to Costa Mesa-based Donahue Schriber Realty Group for $111 million, according to sources familiar with the property. The cap rate on the transaction was just below 5 percent. This return is based on the property’s current net operating income.

“We were looking for a flagship property to have in our portfolio in the Silicon Valley, and this property fit that description. It has very strong tenants like Target and Safeway, and it was completed last year,” said David Mossman, chief investment officer for Donahue Schriber. The property currently has two vacancies totaling about 6,000 square feet.

Donahue Schriber is a major buyer of shopping centers in the Western United States. These would include markets like Northern and Southern California and Seattle.

CalSTRS and PCCP are planning to continue on with their joint venture relationship. During the third quarter of last year they formed another investment joint venture, PacificCal V. There is a total of $150 million of equity in the joint venture.

The pension fund holds a 98 percent stake in the venture as it supplied $147 million of the equity for it, according to a pension fund document. The other $3 million, or 2 percent, came from PCCP.

The investment strategy for PacificCal V is to make value-add investments. The focus of the deals for the venture will be with office buildings and retail properties in the United States in both primary and strong secondary markets.

The leverage on the portfolio for the new venture will likely be capped at 65 percent, according to the investment policy of CalSTRS for all its value-add investments. Per its policy, the pension fund targets net IRRs for value-add investments from 9 percent to 12 percent.

CalSTRS stated in an e-mail that value-add investing includes several forms—releasing, repositioning and redevelopment investment opportunities.

The pension fund has had a relationship with PCCP since 2005. Over these least 10 years, CalSTRS has invested in approximately $2.1 billion with this manager. PCCP does have two regional offices in Northern California, according to its Website. One is in San Francisco at 555 California Street and the other is in Sacramento.

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