By Jon Peterson
On the heels of increasing its commitment in the multifamily real estate market, the California Public Employees Retirement System has made a sizable allocation toward the life science real estate sector, as well. The pension fund has issued a commitment of $500 million to San Francisco-based DivcoWest, as stated by the pension fund in a board meeting document, and the allocation will be invested used toward acquisition of life science assets, according to sources familiar with the relationship.
The pension fund declined to comment other than what it had written in its board meeting document. A company representative of DivcoWest also declined to comment on this relationship when contacted for this story.
This commitment by the nation’s largest pension fund is another example of the institutional capital that is looking to find a home for life science assets. This property type continues to attract large investments from some of the country’s most significant capital sources. Investors are attracted to the property type by very strong tenant demand in an industry that shows no signs of slowing down, with assets located in a limited number of markets around the country and featuring very little vacancy in each of them.
The capital supplied by CalPERS will be its only partnership or separate account that is dedicated to life science properties. The pension fund does have other partnerships that are focused only on one of the four main property types that include office, industrial, retail and apartments. According to the last CalPERS partnership report dated June 30,2020 for its real assets portfolio that includes real estate, the pension fund had no previous relationship stated with DivcoWest.
The West Coast would be a logical place where DivcoWest could be investing some of the capital on behalf of CalPERS. This part of the country is the home to many life science tenants located in the three main clusters along the Pacific Coast, which include the San Francisco Bay Area, San Diego and Seattle.
The commitment by CalPERS with DivcoWest represents its second major commitment to the life science sector in 2021. Over the summer, the pension fund had approved an $800 million commitment into the Blackstone BioMed Life Science Real Estate Limited Partnership. This is an open-ended core plus commingled fund with many other investors also participating in the fund. This includes the New York State Teachers Retirement, which confirmed a $300 million commitment to the fund, the Tennessee Consolidated Retirement System, which put down $150 million, and the New Mexico State Investment Council, which contributed $50 million.