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SACRAMENTO-The California Public Employees Retirement System recently received final bids for its CalWest industrial portfolio and is expected to select a buyer any day now, local industry sources tell GlobeSt.com. Finalists for the estimated $2.5-billion portfolio are reportedly GE Real Estate, AMB Property Corp., First Industrial Realty Trust and Muruelo Maddux Properties.
The portfolio consists mostly of warehouse and distribution product in the Western US. Given a $2.5-billion purchase price and the portfolio's current net operating income, the capitalization rate on the acquisition would be in the 5.5% to 6% range, according to a report by Investments & Pensions Europe, which said final bids were due March 14 and that a final decision was to be made a few days later.
A source at CalPERS acknowledged for GlobeSt.com that brokers have said a deal is in the works but added CalPERS "does not comment about deals that may be in the works." CalPERS owns the portfolio through Rreef, its separate account real estate manager. The two formed the JV in 1998. A source at Rreef did not return a phone call seeking comment.
The CalWest JV with Rreef is being liquidated because it is not meeting its return objectives, according to the IPE article. When the JV was created, the return requirement was 8.5%, according to IPE. CalPERS decided to sell last year rather than change the return thresholds, according to the report.
The CalWest JV stoked its portfolio in 2000 when it acquired a portfolio from Pacific Gulf Properties for approximately $900 million. The following year, it acquired Cabot Industrial Trust and its 360 properties for $2.1 billion plus assumed debt. A CalPERS domestic real estate report from June 2006 puts to market value of the net assets remaining in the CalWest Rreef JV at 1.63 billion. The JV's cost to acquire the net assets in the JV was $762.27 million, according to the report.
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