UNITED STATES - Real estate managers looking after major US pension funds' assets are still seeking large industrial deals to accommodate the local pensions market.
Pension funds with significant amounts of capital to invest have a hard time building up any sizable industrial portfolio through single acquisitions, according to real estate investment houses as many individual industrial purchases are below $10m (€7.2m).
As a result, asset management companies are now developing real estate investment vehicles which can tap into this market gap, through large portfolio acquisitions or joint ventures with industrial owners and developers which could present access to a significant number of assets in a short time.
JP Morgan, for example, has signed an equity joint venture with DCT Industrial Trust to invest in a variety of industrial markets across the country, with equity ownership split 80% to JP Morgan and 20% to DCT Industrial.
Robert Curran, managing director of JP Morgan, said its investment target over the next two to three years is to place around $400m of equity in the marketplace - no equity has yet been invested in the venture - while DCT is expected to put $140m worth of industrial assets into the joint venture in the third quarter.
Assets already held in the venture include properties in Chicago, Dallas and Cincinnati totaling around 92,900 square metres worth $68m.
That said, funds will be used in the future for the acquisition and development of bulk distribution facilities in major industrial areas such as Northern and Southern California, Atlanta, Dallas, New Jersey and Chicago.
Likewise, RREEF has a now secured a 3,600 square metre industrial portfolio in the Inland Empire market in Southern California, priced at $304.80 to $320 per square metre, for its RREEF America REIT II.
Cap rate on the transaction is projected to be around 4.8% to 4.9%, based on current rental rates on the assets.