CalPERS narrows search for CalWest buyers
REAL ESTATE – The $230bn (€175bn) California Public Employees Retirement System (CalPERS) has narrowed the list of candidates to buy the CalWest industrial portfolio.
The four finalists are GE Real Estate, First Industrial Realty Trust, AMB Property Corporation and Muruelo Maddux Properties.
The companies will now resubmit bids for the portfolio by a 14 March deadline. A final decision is expected to be made three days later.
The purchase price for the portfolio is thought to be in the region of $2.5bn. Industry experts have predicted that the cap rate for the transaction will be around 5.5-6.0%. This yield is based on the existing rent that is now being produced by the current net operating income.
The CalWest assets are mostly located in the western part of the US and are mostly warehouse-distribution industrial product. Some of the assets are in prime locations.
CalPERS owns the CalWest portfolio through its separate account real estate manager, RREEF. The two firms formed the venture in 1998.
When the entity was created, CalPERS set the return requirements for the relationship at 8.5%, a level that is no longer achievable in today’s real estate market. Many of the high-quality industrial assets or industrial portfolios in the best markets are trading for cap rates in the 5-6% range.
Last year RREEF outlined two options to CalPERS: to change the return thresholds to reflect the current investment environment or to sell the portfolio. CalPERS chose to sell the assets.