(Dec. 22, 2016) The Massachusetts Pension Reserves Investment Management (PRIM) Board and the Santa Clara (California) Redevelopment Authority closed Dec. 21, 2016 on PRIM’s purchase of 21 acres and a related ground lease in Santa Clara for $112.25 million in cash. The purchase represents the PRIM Board’s first direct investment in real estate and is expected as such to produce millions of dollars in long-term investment fee savings.
The land is occupied by prime office buildings in the heart of Silicon Valley at 5451-5455 Great American Parkway in Santa Clara.
“By purchasing and owning this land directly rather than through an investment manager, PRIM stands to save approximately $11 million in investment-management fees over the next 20 years. This is precisely the sort of innovation and efficiency we have been aggressively seeking across the PRIT Fund portfolio and will continue to pursue,” said Michael G. Trotsky, CFA, PRIM’s Executive Director and Chief Investment Officer. “We’re very excited about this transaction and I couldn’t be more proud of the PRIM real estate and legal team for putting it together.”
Under PRIM’s nationally recognized Project SAVE program, which is entering its fifth year, PRIM has reduced its fees and costs by an annualized $146 million.
DivcoWest brought the potential transaction to PRIM’s attention and advised on the potential purchase.
Timothy Schlitzer, CFA, head of PRIM’s $6.5 billion real estate program, said: “DivcoWest has been a high-performing partner for PRIM in this and other extremely successful investments including One Kendall Square in Cambridge (Massachusetts) and 333 Bush Street in San Francisco. PRIM is always looking for great investments and the Santa Clara opportunity brought to our attention by DivcoWest proved to be an excellent fit.”
“We are thrilled to be building on our relationship with PRIM in a strategic product type that we believe offers a very attractive risk/return profile as a long-term investment,” said Stuart Shiff, DivcoWest’s Chief Executive Officer.
Three Class A, five-story office buildings totaling 449,000 square feet were erected on the property in 2013 and are leased to high tech companies including Dell Inc. and Arista by a separate firm that owns the buildings and as of Dec. 21 is leasing the land from PRIM under a contract that extends 64 years through 2081.
The PRIM team that put together the transaction consisted of: Director of Real Estate and Timberland Timothy Schlitzer, CFA, CRE; Senior Investment Officer for Real Estate and Timberland John LaCara; Investment Officer Christina Marcarelli; Director of Operations Matthew Liposky; Manager of Real Estate and Timberland Reporting George Tsipakis; and Deputy Executive Director and General Counsel Christopher J. Supple.
The Massachusetts Pension Reserves Investment Management Board manages the Pension Reserves Investment Management (PRIT) Fund, which funds the pensions of most state and many municipal retirees. Real estate investments comprise about 10% of the fund, the assets of which are valued at approximately $62 billion.
DivcoWest (www.divcowest.com) was founded by Stuart Shiff, who founded DivcoWest Properties in 1993. DivcoWest is a vertically-integrated operating company with approximately 95 employees that provides asset, property and construction management and leasing services and has offices in the San Francisco Bay Area, Los Angeles, and Boston. DivcoWest is comprised of a dedicated group of professionals with extensive experience in sourcing, structuring, acquiring, financing, developing, redeveloping, managing, leasing and selling primarily commercial real estate and other real estate- related assets. DivcoWest employs a disciplined approach to investing on behalf of a broad base of U.S. and non-U.S. public and corporate pension funds, institutional investors and high net worth individuals, with a focus on creating value through prudent acquisitions, active management and well-timed sales.