REAL ESTATE - The Southern California office of ING Clarion Partners will be focusing on more value-added investments for 2007.
Managing director Richard Pink said: "Our investment plan for this year is to emphasise more value-added kind of transactions. We think that this strategy will make more sense, given where current pricing is for core assets."
ING Clarion will consider a variety of deals for the value-added area. "Some of this could be buying an existing property that need a renovation or repositioning. We will also take a look at investing equity in new development projects," Pink said. The transactions will be done for a mixture of commingled fund and separate account pension fund clients.
The pension fund manager will be looking for returns higher than core. He said: "At a minimum, we want to achieve for value-added deals a 200 to 300 basis point spread over core IRR returns."
The main property types will be considered, including office buildings, industrial properties, shopping centres and apartments. Some of the main markets that it will be involved are Los Angeles, Orange and San Diego counties.
The Southern California office of ING Clarion closed on deals in 2006 that totaled $500m(€381m) in gross investments. There were a total of 13 investments completed, with only two of them being value added and the rest core. A similar figure for total gross investments should be achieved in 2007.
The most recently completed transaction was the purchase of the 114,166ft2 Plaza Del Mar III office building in the Del Mar Heights sub market of San Diego. The purchase price was $61.6m. This was an all-cash transaction and took three weeks to the close the deal.
ING Clarion figures that the property will produce a cap rate in the mid 5% range. This return is based on where rents will be during the second year of ownership.
The manager is anticipating that will be some rent growth in the future. In July of this year 13% of the building will come up for renewal and another 11% in 2008. The tenants in this space all have rents that are below market.
The property is considered a core asset. It was acquired for a commingled fund managed by ING Clarion. Del Mar Heights is a supply constrained market as there is no land available to build new projects on.