Principal Puts Equity Investment for Development in Millbrae in Core Open-Ended Fund

Principal Real Estate Investors, Millbrae, Gateway at Millbrae Station, BART, Caltrain, Republic Urban Properties

By Jon Peterson

Des Moines, Iowa-based Principal Real Estate Investors has made an un-disclosed equity investment into the $335.6 million development project in Millbrae called Gateway at Millbrae Station for its core open-ended commingled fund, the $11 billion Principal U.S. Property Account.

Rod Vogel, senior managing director with Principal, said, “While our commingled fund does have a core investment strategy, it is allowed to have up to 15 percent of its portfolio invested in a mix of either development or value-add transactions. This part of the fund is now somewhere in the range of five percent to six percent.”

This investment won’t always be considered a non-core asset for the fund. Once the overall project becomes 85 percent leased, the commingled fund will be considered a core asset.

Principal became interested in the Millbrae project because of its proximity to multiple mass transportation options—the project is located adjacent to both the Millbrae BART and Caltrain stations. “This is how we first became attracted to investing in this development. It’s one of a few assets in the San Francisco Bay Area that is close to those two transportation options. We know how important this can be from a leasing perspective. We have invested in a project in Sunnyvale that is walkable to Caltrain. We own another asset that is two miles away. The asset near Caltrain attracts rents that are 10 percent to 15 percent higher than in other projects,” said Vogel.

Gateway at Millbrae Station will be Principal’s first ever investment with the developer, Republic Urban Properties. This development should be started sometime during the first quarter of 2020. The project is due for completion during the summer of 2022.

The office part of the project will be a six-story asset that totals 157,000 square feet. This building will be started on a spec basis, and the leasing agent on this will be Newmark Knight Frank. The 320 apartment units in the complex will be leased by Woodmont Real Estate Services based in Belmont.

The mixed-use asset will also have a retail component totaling 36,000 square feet. This will be service retail and include restaurants and other uses. “We have already seen strong interest in this part of the project with 13 leasing offers by retail tenants,” said Vogel.

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