SACRAMENTO, Calif. - During the past few years, joint ventures with the likes of Hines, Jones Lang LaSalle and The RREEF Funds have been the name of the game for the California Public Employees Retirement System's (CalPERS) real estate initiatives. With many REITs disposing of properties and portfolios to access capital, one of CalPERS joint ventures, CalWest Industrial Properties LLC, a venture with Chicago-based RREEF, has acquired a nearly $1 billion industrial portfolio from Newport Beach, Calif.-based REIT Pacific Gulf Properties. The deal brings CalPERS industrial portfolio to $1.5 billion, 18% of the pension fund's $8.2 billion core and specialized real estate holdings.
The $929 million industrial portfolio is composed of 72 properties totaling more than 15 million sq. ft. in California, Washington, Nevada, Arizona and Oregon. The portfolio is 97% occupied. Pacific Gulf will continue to manage the portfolio for CalWest.
RREEF generally has handled acquisitions of single properties or small portfolios for CalPERS, but the plum Pacific Gulf portfolio was too much to pass up, says CalPERS spokesman Brad Pacheco.
"We felt it was an opportunity to step in and pick up a portfolio of solid properties at a good price," explains Pacheco.
Under terms of the agreement, CalWest will make a cash payment and assume $117 million in debt. Approximately $206 million of additional debt will be repaid out of the sale proceeds. CalWest expects to receive a net operating income yield of 8.75% in the first full year of ownership.
Pacific Gulf will continue to market its multifamily holdings - 1,631 units - and is considering options for its 1,500-unit seniors rental housing holdings.