By Jon Peterson
San Francisco-based real estate investor Swift Realty Partners has attracted a $15 million commitment from the Teacher Retirement System of Texas for its Swift Real Estate Partners Fund I, a milestone for the manager that could have knock-on benefits.[contextly_sidebar id=”00e60fd9b369cc2452660688f62dfbd3″]“To get an investor like Texas Teachers is a big deal for us. I think of them as one of the top pension funds in the country that is investing in real estate. It was by no means easy; it was a very difficult process to go through,” Swift founder Christopher Peatross said.
The commitment to Swift is part of the pension fund’s emerging-manager real estate program where the commitments range from $8 million to $15 million or so, much smaller than is the habit. In the Texas Teachers regular real estate investment program, its minimum check size for commingled-fund investments is normally $200 million.
So far, three of the emerging-manager commitments have been with real estate managers either based in the San Francisco Bay Area or that have been active in buying properties in the area. Texas Teachers committed $15 million to the DivcoWest Fund III and $8 million to IC Berkeley Partners III.
DivcoWest Properties is a San Francisco-based value-add investor. San Francisco-based Industrial Capital is the manager of the Partners III fund. According to its Web site, it focuses on the purchase of core-plus and value-add industrial properties across the country.
The Texas pension fund also made a $15 million commitment to San Antonio-based Admiral Capital, which made its first purchase in the San Francisco Bay Area in the middle of June with the acquisition of the 75,000-square-foot Great America Parkway office building in Santa Clara.
Swift has secured approximately $75 million in equity commitments for its commingled fund with a goal of raising $300 million; the capital raising is likely to spill into next year. Swift is close to announcing a capital commitment from another large institutional investor being represented by Credit Suisse Group AG, Peatross said.
Credit Suisse has two San Francisco offices where it pursues investment banking, according to its Web site.
To date, Texas Teachers has committed a total of $363 million to the emerging-managers program for real estate, a spokesperson for the pension fund said. The institutional investor receives a number of benefits, most notably the ability to access smaller investments and managers with whom it might not be able to do business with otherwise. The pension fund also is able to access a larger segment of the growing managers to develop relationships early and potentially to find the next generation of outstanding investment professionals.
The first Swift fund is premised on exploiting value-add opportunities on the West Coast through the purchase of office and industrial properties. The first purchase for the commingled fund is expected to involve an East Bay property, Peatross said. The long-term Bay Area real estate investor has bet heavily on the East Bay’s recovery in this cycle, including multiple purchases in Concord, which is expected to be one of the fastest-growing communities in the region in the next 30 years.
Cleveland-based real estate consultant The Townsend Group advises Texas Teachers along with many other pension funds. “There is a good chance this will help us with our capital raising efforts down the road,” Peatross said.