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CalPERs expands size, scope of RE emerging manager program

The separate account, run by Canyon Partners Real Estate, is CalPERS' top-performing real estate partnership in the last three years.

The California Public Employees' Retirement System is doubling down on its emerging manager program with a $350 million capital infusion and strategy expansion, the pension system said Tuesday.

CalPERS launched a $200 million real estate emerging manager program in 2012 through the formation of the Canyon Catalyst Fund with Los Angeles-based Canyon Partners Real Estate. CCF currently invests with five emerging managers, defined as firms on their first, second or third institutional fundraise or separate account with a maximum of $1 billion in assets under management.

Previously, managers were limited to investing in California. Now, CalPERS is expanding CCF's geographic focus to the Phoenix, Seattle and Portland Metro areas, and its property type focus from the four traditional sectors to also include self-storage and student housing.

In January 2015, the pension system boosted its commitment to CCF from $200 million to $275 million and then further increased its allocation to $375 million that July. CalPERS now has committed a total of $1 billion in equity to the program since inception.

CCF's first vehicle has realized all 16 of its investments, returning "well in excess of its target", according to CalPERS' Tuesday statement.

Over the three years ending June 30, CCF was CalPERS' top-performing real estate partnership, with a net 25.3 percent return. Stockbridge Hollywood Park, a joint venture with San Francisco-based Stockbridge Capital Partners, was the second best-performing partnership, with a 21.3 percent IRR.

In the fiscal year ending June 30, CCF returned 19.4 percent, the fourth-best performing partnership during that period. Overall, CalPERS' real estate partnerships, valued at $30.5 billion, returned 7.6 percent in the year ending June 30 and 9.4 percent over the last three years.

"We are extremely pleased with the success of the Canyon Catalyst Fund", Paul Mouchakkaa, CalPERS' managing investment director for real assets, said in a statement. "Our partnership with Canyon Partners Real Estate is off to a strong start and has added value to CalPERS' real estate portfolio."

CCF has invested in 27 assets across California to date. In February, CCF backed its fifth emerging manager, picking Irvine, California-based BKM Capital Partners to invest in industrial real estate in urban California markets, PERE previously reported.

Its other managers include Rubicon Point Partners, an office-focused firm that invest in the Bay Area; Pacshore Partners, a southern California-focused creative office owner-operator; Paragon Commercial Group, which specialized in neighborhood-serving retail; and Sack Properties, a statewide multi-family manager.

CalPERS overall managed $323.5 billion as of June 30. Its portfolio returned 11.2 percent in the 2016-17 fiscal year, 15 basis points below its benchmark.

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Headquartered in Newport Beach, California, BKM Capital Partners is a real estate fund manager specializing in the acquisition and improvement of value-add multi-tenant industrial properties in metro areas across the Western U.S. Combining a deep knowledge of this niche industrial product type with in-house capabilities including on-site property management, asset management, and leasing to reposition and institutionalize light industrial assets, the firm continues to build on its proven track record, generating strong results with high levels of transparency and engagement for investors. 

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BKM Management Company manages a portfolio of 8.6 million square feet of multi-tenant industrial properties for BKM Capital Partner’s private and institutional investors. With a focus on “boots on the ground” execution at the property level, BKM has in-house capabilities for both property management and leasing. The teams at the property level are focused on ensuring the tenants thrive and that the properties are managed in the most efficient way.




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