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Cabot Seeks $1B Capital Raise for New Core Industrial Fund with San Francisco, Los Angeles and Seattle Among its Targeted Markets

Cabot Properties, Cabot Industrial Core Fund III, Teachers’ Retirement System of Louisiana, San Francisco, Bay Area, Los Angeles, San Diego, Seattle
Photo by Scott Webb on Unsplash

By Jon Peterson

Boston-based Cabot Properties is planning to seek $1 billion in real estate commitments for its Cabot Industrial Core Fund III, as stated in a board meeting document for the Teachers’ Retirement System of Louisiana.

The fund manager will be looking for assets in a variety of markets around the country. Among its targeted markets, according to its website, are the San Francisco Bay Area, Los Angeles, San Diego and Seattle.

The new commingled fund will be investing in properties that are located in markets that represent major population centers and distribution hubs, focused on submarkets that provide connectivity between inventories and the end consumer. The assets will be located in proven in-fill locations with high barriers to entry. Some assets could be in emerging bulk distribution regions with strong demand and growth potential.

Cabot will be mostly investing in existing assets. The amount of leverage planned for the fund will be a limit of 40 percent of uncalled commitments plus portfolio value.

The fund manager is planning to construct the portfolio for Core Fund III with a total number of investments ranging from 30 to 40 assets, and no single property will be able to make up more than 10 percent of the fund. The property values for the fund will range from $5 million to $100 million and equity investments per deal of $3 million to $60 million.

The targeted capital raise for Core Fund III would represent the largest fund for Cabot in its core fund series. The manager raised $693 million for Core Fund II with a final close in 2018 and raised $443 million for the first Core fund in 2015. A new investor in Core Fund III is Louisiana Teachers which approved a $50 million commitment into the fund. This investment can’t exceed 10 percent of the total commitments in the fund.

So far in 2021, there has been a big increase in the new to market tenant demand for industrial assets. According to data compiled by JLL, new to market requirements has increased by 27 percent from 43 percent in 2020 to 70 percent so far this year. The reasons for this is that tenants have had to readjust their space requirements to meet expanding consumer demand.

New to market tenant transactions had slowed in 2020 due to the pandemic. They had dropped from 57 percent in 2019 to 43 percent in 2020.