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CalPERS to commit $6.6bn to RE

The largest US pension plan expects to make one of its largest-ever annual allocations to real estate during its new fiscal year.

The California Public Employees’ Retirement System plans to commit $6.67 billion to joint ventures with more than a dozen real estate managers during the its new fiscal year, which began in July. The planned commitments in the asset class were part of its annual investment plan and disclosed in documents from its investment committee meeting today. 

Among the largest expected allocations for fiscal year 2014-15 was $1.33 billion to Institutional Multifamily Partners, a co-investment joint venture with GID Investment Funds. On behalf of the partnership, which was formed in 2010, GID seeks multifamily acquisition and development opportunities throughout the US. Another major recipient will be Institutional Mall Investors (IMI), for which CalPERS is prepared to earmark $1.053 billion in additional equity. IMI is a core-oriented co-investment venture with Miller Capital Advisory focusing on market-dominant regional and superregional shopping centers in the US.

CalPERS also is anticipated to pledge $986.54 million to Global Retail Investors, a joint venture with Bethesda, Maryland-based real estate investment company First Washington Realty. Since 2005, the two parties have jointly acquired and operated neighborhood and community shopping centers in the US and elsewhere.

Also on the investment roster for the new fiscal year is $933 million in additional capital to Fifth Street Properties (FSP). FSP, a partnership with Los Angeles’ CommonWealth Partners, targets core, core-plus and value-added acquisitions and development in large-scale office and mixed-use properties throughout the US. CommonWealth also is the real estate manager for National Office Partners, an office-focused joint venture with CalPERS that was designated an additional $71 million in capital in July.

CalPERS also is expected to dole out $412.79 million to Institutional Core Multifamily Investors, a partnership with Invesco Real Estate to invest in core apartment properties in the West and Midwest regions of the US. The pension plan hired Invesco as a multifamily real estate manager in April 2013 and funded the program with an initial $250 million allocation.

Another relatively new joint venture that is likely to receive a follow-on commitment is Institutional Logistics Partners, a partnership with Bentall Kennedy to buy stabilized, core industrial properties in major US markets, primarily coastal markets. The partnership, which was established with an initial commitment of $250 million in 2013, is likely to be granted an additional $600 million.

Menlo Park, California-based private equity firm GI Partners stands to receive a total of $823.92 million for two existing joint ventures, TechCore and CalEast Solstice. The new fiscal year investment plan calls for TechCore, a technology-focused core real estate fund that was launched in 2012 with a $500 million commitment from CalPERS, to be allocated $400 million, and for CalEast Solstice, an industrial-focused partnership, to be bestowed with a follow-on pledge of $423.92 million. CalPERS also is anticipated to direct a total of $70.93 million to two other programs with GI Partners, CalEast Canada Limited Partnership and CalEast Industrial Investors.

Additionally, $200 million is slated to go to Pacific Multifamily Investors, a joint venture with Palo Alto, California-based Pacific Urban Residential to invest in Class B multifamily assets in the western US. One of CalPERS’ newest partnerships, Pacific Multifamily Investors was created in January with an initial allocation of $214.50 million.

CalPERS also listed in its documents a number of smaller planned allocations of under $100 million each to partnerships with real estate managers such as Hines, Newland Communities and Centerline Holding. The pension plan’s aggregate real estate allocations for fiscal year 2014-15 represents one of its largest-ever annual allocations to the asset class. By comparison, CalPERS' real estate team allocated $5.7 billion to its strategic partners in fiscal year 2013-14 and $4 billion in fiscal year 2012-13.