Home AEC DWS Group Creates $1.3B Industrial Fund with Majority of Assets on the...

DWS Group Creates $1.3B Industrial Fund with Majority of Assets on the West Coast

JLL, Marine Drive Distribution Center, Portland, Clarion Partners, LBA Logistics
Photo by CHUTTERSNAP on Unsplash

By Jon Peterson

In a sign that interest in industrial real estate is nowhere near its conclusion, another global institutional investor is pushing for a massive initiative into the space. New York City-based DWS Group has established the RREEF Core Plus Industrial Fund with a current net asset value of $1.3 billion, according to a board meeting document for the Arkansas Teacher Retirement System. This commingled fund has 61.6 percent of its portfolio located on the West Coast, making that a significant part of its investment strategy.

Arkansas Teacher was one of the most recent investors to join the fund with a commitment of $70 million, according to documents from the organization.

DWS did not respond to an email seeking comment for this story.

The West Coast represents six of the top 10 market exposures for the commingled fund. The areas where the fund has allocations include 15.1 percent for the Los Angeles/Long Beach/Santa Ana market, 14.9 percent for San Diego/Carlsbad/San Marcos market, 11.2 percent will go toward Seattle/Tacoma/Bellevue, 9.6 percent for Portland/Beaverton/Vancouver, Wash., 7.1 percent for Riverside/San Bernardino/Ontario and 3.7 percent for San Jose/Sunnyvale/Santa Clara.

In line with that breakdown, six of the top 10 assets by value are also on the West Coast. These would be $186.1 million for Vantage Point in Poway, $123.2 million for Portland Distribution Center in Portland, $107.3 million for Olympia in Kent, $90.7 million for 9050 Hermosa in Rancho Cucamonga, $52.1 million for Nelson Business Park in City of Industry and $47.7 million for 111 Uranium in Sunnyvale.

The RREEF Industrial Fund has an open-ended investment structure, so it will continue attracting new investors over time. It has a strong investment performance with an 18.79 percent gross return over the last 12-month period. This result has outperformed the NCREIF Property Index Industrial by 468 basis points, according to the documents reviewed by The Registry.

The commingled fund has a core plus investment strategy, and it can both acquire existing properties and seek opportunities to develop new assets. So far, the portfolio of the fund has a total of 25 assets with 18 of them classified as core and seven as non-core. The fund is targeting up to 50 percent non-core assets, while up to 25 percent of the portfolio will be spec development. The expectation is that development yield spreads are 50 to 150 basis points wide of stabilized yields, depending on the market.

The current portfolio in the Industrial Fund totals 6.9 million square feet. The average weighted lease term for the core assets is six years. The rents in the core properties are 11.2 percent below market. The properties in the fund are leased to a total of 112 tenants. These companies are a mixture that includes logistics, consumer retail and manufacturing.