Two Bay Area Firms Receive $650MM Commitment from CalPERS

Affordable Housing, Irvine Community Land Trust, Irvine, California Assembly

By Jon Peterson

Palo Alto-based Pacific Urban Residential and San Francisco-based GI Partners will be expanding their partnership with one of the world’s largest pension funds, the California Public Employees Retirement System. CalPERS has awarded a new $350 million allocation to Pacific Urban for the partnership between the two that is called Pacific Multifamily Investors (PMI) while also allocating $300 million to a venture with GI Partners called TechCore.

The investment strategy for PMI will be to buy existing vintage apartment assets that would typically be over 11 years old. These properties need minor rehab work and are usually assets that would be considered workforce housing.

The allocation would provide the multi-family residential investment company with significant buying power to go after assets. “We expect that with leverage in the range of 25 percent to 30 percent, we will have a total buying power of $500 million worth of deals with the new allocation,” says Al Pace, chief executive officer for Pacific Urban.

Pacific Urban has been active with this program over the past 12 months in the San Francisco Bay Area. Some of its deals have included properties in Fremont and Hayward, both rapidly growing markets in the region’s East Bay and Northern Silicon Valley submarkets. “These are markets that we believe get the benefit of being spillover from some of the other prime markets of San Francisco, Oakland and Silicon Valley. One of the benefits for us buying in places like Fremont and Hayward is there hasn’t been a great deal of new construction in either of those markets but plenty of demand for existing assets,” said Pace.

PMI is now a program that Pacific Urban has had for several years that has allowed the investment firm to buy up a portfolio for this partnership valued at roughly $1.6 billion. The program so far has mostly been active across West Coast markets in regions such as the Bay Area, Southern California and Denver. It has also been trying to acquired and bid on some assets in Seattle, and the company has recently opened up a new regional office in Manhattan.

CalPERS has also awarded a commitment to another Bay Area-based firm for the acquisition of technology-based real estate assets. This commitment was a new $300 million allocation to TechCore, a partnership with the pension fund and San Francisco-based GI Partners.

The investment strategy for TechCore is to buy these real estate assets on a nationwide basis. Some examples of the kinds of properties it would acquire include data centers, internet gateways, corporate campuses that are leases to technology tenants as well as life science properties.

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