By Jon Peterson
Boston-based Cabot Properties will be looking to buy industrial properties in both San Francisco and Seattle for its new commingled fund, Cabot Core Industrial Fund.
The real estate manager completed the capital raise on the commingled fund at $443 million. The amount raised was well short of the original targeted amount of $750 million, as stated in a board meeting document by the Pennsylvania Public School Employees’ Retirement System.
Cabot is a new player in raising capital for core industrial commingled funds. All of its previous commingled funds have focused on buying or investing in value-add industrial assets. The manager does have a track record of investing in core industrial assets on a separate account basis for institutional investors.
The lead investor in the commingled fund was Pennsylvania Public School with a commitment of $150 million. The other investors in the fund included other pension funds and mix of additional institutional investors.
The total capitalization of the fund is in the range of $738 million. This will be achieved by having the leverage component on the fund at 40 percent. The commingled fund has a three-year investment period that started at the time of the final close of the investment fund.
Cabot has already completed a significant portion of the deals for the Industrial Fund. The real estate manager has invested a total of $235 million in a combination of equity and debt in nine separate transactions. The assets are located in South Florida, Houston, Atlanta, Chicago, Dallas, Los Angeles and eastern Pennsylvania.
Cabot will only be buying existing and leased distribution properties for the fund. It typically targets properties that are 10 to 15 years old with lease terms of at least three years remaining.
The real estate manager will be looking to acquire assets that can produce net returns of 8 percent to 10 percent. This return would factor in a five percent to six percent current yield. Overall, returns would have 70 percent to 80 percent coming from current income and the balance from the growth of income through appreciation.