CalPERS and GI Partners form $500m separate account

The core investment vehicle, called TechCore, will be managed by the Menlo Park, California-based private equity real estate firm and will invest in technology-focused properties in the US.

 The California Public Employees’ Retirement System (CalPERS)has launched TechCore, a $500 million core real estate separate account managed by GI Partners, to buy commercial real estate properties with a technology focus. The properties will include data centres, Internet gateways, corporate campuses for technology firms and life science properties located in major US cities.

“This partnership represents the next generation of innovative investments to come in core real estate that is wired and ready to support the technology,” said Joe Dear, chief investment officer for CalPERS, in a statement.

“We are pleased to further expand our relationship with GI Partners with the TechCore commitment,” added Ted Eliopoulos, CalPERS’ senior investment officer for real assets. “We believe the firm’s experience, network and investment discipline will prove successful.”

As part of its strategic plan for real estate, CalPERS is positioning its holdings in the asset class to have a low correlation to equities, as well as offer stable cash yields and a partial inflation hedge. To achieve this goal, the pension fund is targeting a 75 percent core allocation for the asset class, which the new separate account with GI Partners will support. “The TechCore investments will have core qualities of high occupancy, strong cash yield, quality tenancy, strong demand and long-term leases,” said a CalPERS spokeswoman.

TechCore represents the latest venture between CalPERS and GI Partners. The $235 billion pension fund committed $500 million to the firm’s GI Partners Fund in 2001, announcing in December that it had earned a $695 million profit and a 31 percent net annualised internal rate of return on the investment. CalPERS went on to make follow-on commitments of $500 million each to GI Partners Fund II and III. 

GI Partners also manages more than $2 billion in direct investments on behalf of CalPERS. Management of the pension plan’s CalEast industrial and logistics real estate portfolio was consolidated with the firm in December 2010.

The firm created Digital Realty Trust, a data centre REIT, in 2002 and took the company public two years later. It also has invested in real estate and operating companies related to telecom infrastructure, life sciences, technology manufacturing, IT infrastructure, data centres and corporate campuses.