CalPERS emerging manager raises first-time fund

San Francisco-based Rubicon Point Partners has closed its debut commingled fund – a value-add vehicle targeting the office sector – on $230 million, PERE has learned.

The first-time fundraiser secured commitments of $50 million apiece from Connecticut Retirement Plans and Trust Funds and Pennsylvania State Employees’ Retirement System for Rubicon First Ascent, according to PERE data. Other investors include university endowments, foundations, family offices and other pensions.

For a decade prior to launching the fund in December 2019, the firm has been an emerging manager in Canyon Partners Real Estate’s Catalyst Funds, which manage capital from the California Public Employees Retirement System through joint ventures. Rubicon Point declined to comment when asked if CalPERS committed to First Ascent.

The already arduous task of raising a first-time fund was rendered even more difficult by the pandemic, which came on just four months into the fundraising process, co-managing partner Ani Vartanian told PERE. Unable to do a typical road show, the firm took the process online, even creating virtual 3-D tours of its 11-building portfolio.

Despite targeting the office sector, arguably the biggest question mark for the post-covid world, the group raised more than two-thirds of its capital after March 2020. Vartanian said the investors that committed are hoping to benefit from her firm’s “sharpshooter” approach to the office sector to take advantage of “value dislocation” in the sector.

“The investors we have on board, they’re smart, they get it, they are excited to lean in and invest in this space, which has otherwise gotten a lot of bad press,” she said. “We think it’s going to benefit those folks incredibly well.”

Rubicon Point focuses exclusively on office properties in tech-centric innovation hubs such as California’s Bay Area, Seattle and Portland. It targets properties in vibrant downtown areas close to public transit. Vartanian expects those types of assets to thrive even as more companies allow workers go remote or split their workdays between home and office.

“There has to be a reason for people to come into the office. If they’re sitting in the middle of nowhere with no amenities or services nearby, it’s going to be tough for workers to distinguish between their homes and offices,” she said. “Offices with restaurants, bars and cafes right out the door contributes to a team environment. These urban cores that got hit the hardest are actually going to rebound the fastest.”

Rubicon First Ascent has three properties under contract, Vartanian said, accounting for 35 percent of the fund, which has total buying power of $770 million including debt. Two of the investments are in the Bay Area, the other is near Seattle.

Vartanian said there have been few forced sellers in the office market, as most owners continue to collect rents at a healthy rate. Disciplined use of leverage leading up to the pandemic has prevented widespread distress, she said, adding that the debt market has normalized as lender confidence grows in the sector, she said. But, she acknowledged there were some big questions about offices yet to be answered.

“There is wide scale understanding and encouragement that people will come back, the question is in what scope,” Vartanian said. “Hybrid is here to stay, and people are still trying to figure that piece out. It’s going to take some time.”