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Massachusetts PRIM does first direct RE deal

The pension system bought a 21-acre site for $112.3m in its first direct acquisition.

The Massachusetts Pension Reserves Investment Management (PRIM) has executed its first direct real estate deal, the pension system said on Thursday.

PRIM, which manages about $62 billion in assets, including $6.5 billion in real estate, closed on a 21-acre property in Santa Clara, California, on Wednesday. The land, purchased from the Santa Clara Redevelopment Authority, includes three Class A office buildings owned by an unnamed company that is leasing the land from PRIM under a long-term contract that runs through 2081. The five-story buildings are located at 5451-5455 Great American Parkway.

“By purchasing and owning this land directly rather than through an investment manager, PRIM stands to save approximately $11 million in investment-related management fees over the next 20 years,” said Michael Trotsky, PRIM’s chief investment officer. “This is precisely the sort of innovation and efficiency we have been aggressively seeking across the PRIM Fund portfolio and will continue to pursue.”

San Francisco-based private equity real estate firm DivcoWest advised PRIM on the transaction. The pension system has invested in multiple DivcoWest funds, including $50 million each to DivcoWest Fund III and Fund IV, part of the firm’s value-add, office-focused fund series, according to PERE data.

In the year ending August 31, PRIM’s real estate had a 13.6 percent rate of return compared with 8.7 percent for the overall portfolio, according to the pension's most recent investment report.