Tennessee Pension Fund Buys Sacramento Shopping Center for $38.5MM

Tennessee Pension Fund, San Francisco, Bay Area, Sacramento Shopping Center, Sacramento, Raley’s Center, Elk Grove, Barings Real Estate Advisers
Rendering courtesy of I-5 Design & Manufacture.
Tennessee Pension Fund, San Francisco, Bay Area, Sacramento Shopping Center, Sacramento, Raley’s Center, Elk Grove, Barings Real Estate Advisers
Rendering courtesy of I-5 Design & Manufacture.

By Jon Peterson

The Tennessee Consolidated Retirement System has paid $38.5 million to acquire the 103,853 square foot Raley’s Center of Elk Grove in Elk Grove, as stated by the pension fund in an e-mail.

Tennessee acquired the property as a separate account investment with Hartford, Conn.-based Barings Real Estate Advisers. The real estate manager declined to comment on the pension fund client with which it acquired the property and what the purchase price was.

Barings believes that by buying the property in the Sacramento area it achieved a higher return than would have been the case had the property been located in the San Francisco Bay Area or Southern California. “If this same quality asset had been located in those other two markets, the cap rate would have been 100 basis points less than what we achieved in Elk Grove,” says John Kennedy, a managing director for Barings. He declined to state what the cap rate on the deal in Elk Grove was. Kennedy works out of the company’s regional office in El Segundo.

The real estate manager sees that the Raley’s Center is a very strong performer in a group of assets with good demographics. “The asset has one of better performing Raley’s in the chain. Within a three-mile radius of the property there is a population base of 109,000, and the area has an average household income approaching $100,000,” said Kennedy.

Raley’s Center is a property that was first developed in 2006. When Barings acquired the property, the asset was 91 percent leased. Besides the grocery store, the other tenants in the property include Starbucks, Subway, Jamba Juice, Panda Express, Domino’s Pizza and Supercuts.

There will be a chance to add some value to the property going forward. “The current occupancy on the property is below the 95 percent for retail in the trade area. Since taking over ownership of the property we are in discussions with other tenants that would take the occupancy up to 98 percent,” said Kennedy.

Barings is a believer in the grocery-anchor retail property type. “I think that this kind of retail is one that is not being impacted much from what is happening with other kinds of retail around the country. Necessity-type retail is still performing at a high level,” said Kennedy.

The real estate manager is not a stranger to grocery-anchored retail in the Sacramento region. Barings has owned the 180,000 square foot Renaissance Creek asset in Roseville since 2004. This property is anchored by Safeway.

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