Wisconsin Pension Fund Joins Essex in New Apartment Joint Venture

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By Jon Peterson

The State of Wisconsin Investment Board and Palo Alto-based Essex Property Trust have formed a new equity joint venture to invest in apartments. It’s being called WESCO IV. Both investors are putting $80 million of equity into the venture with each holding a 50 percent ownership position in the relationship.

bay area housing, uli san francisco, polaris pacific, silicon valley, san francisco housing, bay area news, san francisco real estate news“We will not be publicly releasing any additional information on this venture until our first quarter 2014 earnings report on May 8th,” says Barb Pak, director of investor relations for Essex.

Northern California will be one of the targeted markets for the joint venture. This is because the venture plans to buy in markets where the Essex already has a major presence and exposure. These markets would include Northern and Southern California and Seattle.

SWIB wrote in an e-mail that the investment strategy will be the same as the previous joint ventures the pension fund has created with Essex. It will be looking to buy existing core assets. The pension fund expects market rate returns for the transactions. This would typically mean cap rates in the range of four percent to six percent. These yields are based on the current net operating income in the properties.

A previous WESCO joint venture did have a property in the San Francisco Bay Area. WESCO III had paid $42.5 million or $299,000 per unit for the 142-unit Regency at Mountain View in Mountain View, according to the Essex Web site. This property is located at 333 Escoela Avenue.

WESCO III had acquired the property in May of 2013. This venture was formed in 2012 and included a $60 million equity investment by SWIB. Other WESCO ventures have included properties in the San Francisco Bay Area in markets like Fremont, Santa Clara and San Francisco.

SWIB and Essex first started their relationship in 2011. Since then, the pension fund has made equity investments into the ventures totaling $377.5 million.

According to its Web site, Essex had an apartment portfolio totaling 163 existing properties with 33,975 units and 11 projects under construction with 2,051 units. These portfolios were based on assets for the company as of the end of January. This portfolio does not include the assets that were part of the acquisition of San Francisco-based BRE Properties, which closed earlier this month.

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