A growing Newport Beach-based pension fund management firm has closed more than $80 million in new real estate purchases in the Midwest for its clients.
But PM Realty Advisors Inc., a wholly owned subsidiary of Pacific Life of Newport Beach, has another $236 million in deals pending across the country.
In 2000, the company expects to add $450 million to $500 million of new acquisitions to its portfolio, which is now valued at around $1.8 billion.
“This is a company that has always been a player,” said Peter Andrich, director of Cushman Realty Corp. in Irvine. “They’ve always done well attracting major pension funds. But they’ve been particularly active over the past several years.”
Formed in 1984, PM Realty Advisors is different from many other portfolio managers in that it doesn’t like to co-invest in properties and it focuses on lower returns with less risk. “The type of real estate holdings we prefer are referred to in the industry as core properties,” said Jeff Cavanaugh, director of investments and a principal with PM Realty Advisors.
“For most pension funds, core properties serve as the building blocks for their investment portfolios,” he added. “Then they branch out into more risk-related properties.”
PM Realty looks for real estate that can bring an 11% to 12% return to its clients. Opportunity fund managers, who usually are seeking properties needing improvements, are now trying to deliver around 18% to 20% to real estate investors, according to Cavanaugh.
“We’re known as being very conservative managers,” he said. “We look for stable, low-volatility properties.”
Almost 45% of the firm’s investments are in industrial and warehouse types of facilities. PM Realty Advisors, which is not affiliated with the Texas-based commercial brokerage PM Realty Group, also targets suburban office space as well as grocery-anchored community shopping centers and garden-style apartments.
“For the most part, we’re not going to do major renovations,” said Cavanaugh. “We will make improvements over time to make sure a property remains a Class A quality building. But we’re typically investing in well-positioned real estate that is substantially leased.”
Currently, PM Realty Advisors has its portfolio scattered throughout the country. About 28% is in the West while some 34% is in the South. Another 26% is in the Midwest and the remaining 12 % is in the East.
In Orange County, PM Realty Advisors has several properties in its management portfolio. Those include the 2 Venture Building in the Irvine Spectrum, which is 98,500 square feet. The five-story office complex is on the northwest corner of Irvine Center Drive and Barranca Parkway.
The firm also controls an 84,000-square-foot shopping center, Aliso Creek Plaza, on Pacific Coast Highway in Laguna Beach.
“Our plan for this year will be to stay with a geographical diversification,” said Cavanaugh. “But with all of the growth going on in the South and West, we’ll probably do about two-thirds of our investing just because of the growth going on in those markets.”
PM Realty Advisors also is planning to increase its portfolio of retail and apartment properties, according to Cavanaugh.
The company advises about a dozen major pension funds. Its largest is the public employee retirement system in Nevada. Other major pension groups PM Realty Advisors works with include employee retirement systems in Orange County and Alaska.
“In the next year, we’ll do some more office investments,” said Cavanaugh. “But those types of acquisitions probably won’t be a huge portion of our business.”
The latest deals by PM Realty Advisors that total almost $82 million in investment spending include:
n Three warehouse and distribution buildings in Cincinnati. The portfolio totals more than 1 million square feet. One building is leased to Office Depot and another has been rented to GATX, a national distribution and warehousing services company. The third complex is leased to a hair-care products maker.
n A 350,000-square-foot warehouse and distribution facility in Chicago.
n In Atlanta, a 575,000-square-foot industrial complex.
n A 65,000-square-foot office building in St. Louis. n
