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Tennessee Pension Fund to Buy Industrial Assets in San Francisco and Seattle

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By Jon Peterson

Nashville-based Tennessee Consolidated Retirement System has in the works a $221.3 million equity investment into a nationwide industrial portfolio, as stated in an e-mail from the pension fund. The properties in the portfolio include three assets in San Francisco and two in Seattle.

The pension fund declined to give out any other details on these assets as well as the name of the seller and the manager from whom it is buying the portfolio until the transaction closes. This is projected to happen sometime in September. The investor is currently in due diligence on the portfolio.

The deal that Tennessee Consolidated has in planning totals 19 properties and amounts to 3.3 million square feet of space. The assets are located in seven different markets; along with the properties in San Francisco and Seattle, there are five in Los Angeles, six in Chicago and one each in San Diego, Portland and Dallas.

This potential portfolio deal is an example of how some of the large pension funds look to grow their real estate assets with industrial properties. This type of investor may find it difficult otherwise to place bets in the industrial space one at a time. Most properties are priced under $10 million making one-off purchases time-consuming and inefficient for large pension funds to build up a significant industrial portfolio.

Tennessee Consolidated is currently under-allocated for industrial assets. Through March of this year, the pension fund had 10 percent of its real estate portfolio made up of industrial properties. The National Property Index of the National Council of Real Estate Investment Fiduciaries pegs that figure closer to 15 percent in industrial properties. The NPI is the index used for core properties in the United States and it is considered by many pension funds around the country as a guide for real estate investing.

Tennessee has a real estate portfolio valued at $3.174 billion, as stated on its Web site. The pension fund’s core industrial portfolio has a current occupancy of 93.5 percent. The investor typically invests in core assets through its separate account real estate managers. These include J.P. Morgan Asset Management, Deutsche Asset Management’s Alternatives & Real Assets, Clarion Partners, Cornerstone Real Estate Advisers, BlackRock and L&B Realty Advisors.