The California Public Employees’ Retirement System has tapped three Orange County real estate investment firms to handle $200 million for urban infill projects.
Newport Beach-based Buchanan Street Partners Inc. and Irvine-based Capri/Capital Advisors are set to receive $60 million each, while Irvine-based Institutional Housing Partners Inc. is set to collect $40 million of the CalPERS money.
CalPERS also has earmarked $40 million as a contingent investment to San Antonio-based American CityVista Ltd., which is headed by former Housing and Urban Development secretary Henry Cisneros. Another $50 million has been set aside for allocation as needed by the firms.
Final negotiations should take another 30 to 60 days before the money can be allocated, according to a CalPERS spokesperson. But the investment partners say they already are eyeing possible development projects.
According to Daryl Carter, co-chairman of Capri, the firm plans to do more of what it’s done for the past nine years: invest in apartments in dense urban markets.
Capri has worked along the Santa Ana (I-5) Freeway corridor in recent years, investing between $30 million to $45 million in Santa Ana alone, Carter said.
“Inner cities are underserved by capital, and it’s innovative of CalPERS to invest in that sector,” Carter said.
Urban developments scare off many investors who see it as risky, according to Carter.
“We look at it as safer,” he said. “We find that some of the better investments are in dense urban markets.”
Capri is bullish on renovating older apartments in dense areas because it’s more difficult for new developments to come on line and offer competition, Carter said.
Although Capri has investments throughout the Midwest, the CalPERS money is slated to go to California projects.
The strategy at Buchanan Street Partners is broader in scope.
“We will consider investing in retail, office, multifamily and select industrial projects,” said Robert Brunswick, the firm’s chief executive. “We have targeted 25 cities in California, around urban areas, that satisfy what CalPERS is looking for.”
Buchanan is seeking to invest $10 million to $30 million per project, according to Brunswick.
CalPERS allocated $250 million for investments in November and began searching for development partners to handle the money. The pension fund’s search committee whittled the initial list of 161 firms in California and throughout the nation down to the final four.
“We were looking for firms with a good track record in urban development that can tap into the urban market and enhance the value with their expertise,” said Brad Pacheco, a CalPERS spokesperson. “We’ve been progressive in investing in urban real estate in our portfolio for some time.”
In all, CalPERS’ California Urban Real Estate Initiatives program currently has banked more than $1 billion for urban infill projects, including $150 million earmarked to develop an affordable multifamily housing program by year’s end.
CalPERS plans to start looking for investment firms for the housing program in August, with a selection date set for November. n
