San Francisco Pension Fund Puts $50MM into New Industrial Investment Vehicle with Focus on Bay Area

San Francisco Employees Retirement System, San Francisco, CapRock Value-Add Industrial Fund III, Northern California, CapRock Partners

By Jon Peterson

San Francisco Employees Retirement System has approved a $50 million commitment into the CapRock Value-Add Industrial Fund III, as written by the pension fund in a board meeting document. This commingled fund will likely be investing some of the capital into the pension fund’s backyard, since the Northern California region is one of the main targeted markets for the fund. Its other focused markets include Southern California, Arizona and Nevada. Smaller portions of the commingled fund could be considered for assets in the Pacific Northwest and Salt Lake City.

The commitment by San Francisco Employees is part of a total of $250 million of equity capital that has been raised by Newport Beach, Calif.-based CapRock Partners. This capital raise equaled the hard cap that the manager placed on the fund before it started to seek commitments from investors. This is an indication of the appetite that institutional investors have for the industrial property type, which many see as the best performing property sector now and for the foreseeable future, according to industry sources.

This equity raise, combined with co-investment capital raised by the manager and leverage of 55 percent to 65 percent loan-to-cost at the individual property level, will allow the manager to acquire as much as $1 billion worth of industrial assets for the commingled fund in the future.

Some of the capital for the commingled fund has already been invested in the marketplace. The manager will by the mid-year have allocated around 33 percent of the transactions for the fund, although it is not clear where these assets are located.

Fund III will only be acquiring existing assets. It will not be making any equity investments into new development projects. CapRock will be buying mid-market size warehouse/distribution industrial assets with most of its transactions pegged to be in the range of $15 million to $50 million.

The new fund was the first investment product offered by CapRock that sought commitments in a commingled fund format. The manager in the past had created joint ventures with a single institutional investor to invest in industrial assets.

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