John Frandson, managing director for Des Moines-based Principal Real Estate Investors, tells GlobeSt.com that the fund is opening with "four or five" projects or acquisitions in its sights, including a three-city portfolio buy. Due diligence is under way for deals in Dallas, Houston, San Antonio, Austin and Phoenix. "We're really hitting the ground running," he says.
Frandson says CalSTRS' equity, which will be 35% leveraged, is up to $210 million and can be increased. "The plan is this is not just a one-time shot," he stresses. "We want to create a significant portfolio beyond the $600 million." He estimates it will take "two or three years" to exhaust the initial round of funding.
Principal has overseen other CalSTRS-funded joint ventures for other property types, but this is the first time it's taken the purse strings for one of its industrial programs. Frandson says the three-way alliance has been four to six months in the making.
Frandson says the JV expects 75% of the pool will be spent on existing buildings and 25% will fund ground-up development. Whether one-offs or portfolios, the JV is favoring functional, low-finish buildings--class A, class B and value-adds in the southeastern, south central and southwestern regions of the US. The spotlight is pointed at all four Texas metros, Atlanta, Nashville and Jacksonville, Tampa and Orlando, FL.
Although he can't discuss the expected return, Frandson did say that the return margin would be one of the factors in determining the length of the hold. The going-in plan, though, is to create a portfolio for a long-term hold.
Principal is the common thread between the Sacramento-based global institutional investor and Sealy, an entrepreneurial real estate company. Frandson points out its dealings with Sealy have been as a lender--until now. "It's a nice marriage and it's got huge potential," Frandson says.
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