Home Commercial Oregon Pension Fund Creates $250MM Separate Account with DivcoWest to Focus Markets...

Oregon Pension Fund Creates $250MM Separate Account with DivcoWest to Focus Markets that Include Bay Area and Seattle

California Public Employees Retirement System, Pacific Northwest, Seattle, Rubicon Point Partners, Sack Properties, Canyon Partners Real Estate, CalPERS

By Jon Peterson

Oregon Public Employees Retirement Fund has established a new separate account relationship with San Francisco-based DivcoWest Properties to invest in real estate on a national scale. The investment from the pension fund was for $250 million, as stated in a pension fund board meeting document. Some of its targeted markets will include the San Francisco Bay Area and the Puget Sound region.

DivcoWest declined to comment when contacted for the story.

This new account will be the first time that Oregon has invested with DivcoWest outside of its commingled funds. The overall relationship was first started in 2014 when Oregon PERF issued a commitment of $100 million into DivcoWest Fund IV, and another $250 million commitment was approved by the pension fund for DivcoWest Fund V in 2016.

All of the capital for the separate account will invest in core plus types of transactions. The pension fund defines this strategy as one where the transactions will be able to achieve a 50 to 100 basis points higher returns than is the case for core deals. The targeted returns for the core plus deals will be 9 percent to 10 percent on a levered basis. The amount of leverage on the separate account portfolio will be around 45 percent.

DivcoWest will have full investment discretion on the account with Oregon PERF. This means that the real estate manager will be able to make the final investment decision on its own and not need approval from the pension fund.

All of the transactions for the account will be with existing creative office buildings in markets fueled by the growth of technology tenants. There will be no leasing risk taken on any of the deals for the account. Besides the Puget Sound and San Francisco Bay Area, some of these other markets would include Austin, Boston, New York City and Washington, D.C.