CalPERS Consolidates Management of Its Industrial Properties
The formidable California Public Employees’ Retirement System has decided to award its industrial real estate advisory contract for the West and Northwest to RREEF Funds, an institutional investment manager. The East regional contract will go to LaSalle Advisors, a CalPERS representative confirmed Tuesday.
The assignments to the two firms--which replace six other CalPERS industrial property investment managers (LaSalle is an existing CalPERS industrial advisor)--are the latest moves in the state retirement system’s ongoing review and regional consolidation of its real estate investment advisory relationships.
The West and Northwest assignments entail managing industrial property investments totaling about $495 million. Chicago-based LaSalle will be responsible for properties with a total value of about $312 million. .
The values of the contracts were not released, but fees for investment advisors typically range from 0.75% to 1.5% of the value of assets under management.
CalPERS industrial properties in Southern California total almost 2.7 million square feet in 70 buildings and are valued at nearly $80 million, according to CalPERS data. The West regional portfolio includes nearly 7 million square feet in the Reno area valued at more than $100 million.
Reflecting CalPERS’ new strategies in its real estate advisory relationships, RREEF and LaSalle have also agreed to co-invest $10 million and $9 million, respectively, into existing CalPERS regional portfolios and future acquisitions.
CalPERS is the nation’s largest public pension fund, with assets exceeding $125 billion, including real estate assets valued at about $4 billion.
San Francisco-based RREEF, which announced Monday that it has been acquired by Dutch real estate investment advisor RoProperty Services, declined to comment.
The firm, headed by Managing Principal Donald A. King Jr., was founded in 1975 and currently manages about $8 billion in assets for about 150 clients. It has maintained a major presence in Southern California and has been an advisor to CalPERS in the apartment and retail real estate sectors.
In the wake of the early 1990s real estate recession that cut into its investment returns, CalPERS has been reviewing and consolidating its advisory relationships and seeking proposals from other companies.
In mid-1996, CalPERS also delegated authority for managing its real estate portfolio, and hence the advisory relationships, to senior investment officer David Gilbert, who joined the fund from investment banking company J.P. Morgan. Part of Gilbert’s strategy is to have the advisory firms co-invest equity with CalPERS.
In September, for instance, CalPERS engaged SSR Realty Advisors (for the West region) and General Investment & Development Co. (East region) to manage its $539-million apartment portfolio--with both firms agreeing to join in CalPERS’ existing and future apartment investments.
In October, CalPERS issued a request for proposals seeking candidates to manage its office investments, divided into West and East regions. Fourteen candidates responded, including RREEF, LaSalle and two L.A.-based firms--CB Commercial Real Estate Group unit Westmark Realty Advisors (already a CalPERS office and retail advisor) and CommonWealth Pacific. Interviews with finalists are scheduled to begin after Jan. 12.
