CalPERS leads $2.8B deal to sell West Coast holdings
Sacramento Business Journal

May 18, 2007

A partnership that includes the world's largest public pension fund is selling its West Coast industrial holdings to a private-equity real estate investment firm.

Walton Street Capital of Chicago is paying an estimated $2.8 billion to purchase the portfolio of CalWest Industrial Holdings LLC, which comprises almost 100 industrial properties on the West Coast, according to several industry experts. CalWest is a partnership between the California Public Employees' Retirement System, based in Sacramento, and real estate investment manager RREEF, a subsidiary of Deutsche Bank that is also in Chicago.

The two partnered several years ago to invest in industrial real estate and are now looking to cash in on the premium price that industrial space is drawing, said Dan Fasulo, director of market analysis for Real Capital Analytics Inc. of New York City. Real Capital has been tracking the sale of CalWest Industrial's holdings.

Several top brokerages are involved, and because of strict confidentiality agreements required by CalPERS, no one involved in the deal would comment publicly. A CalPERS spokesman would not comment about the deal but said it has $1.6 billion invested in the CalWest venture. It's unclear what return CalPERS would see on that investment.

But several real estate representatives, speaking on the condition of anonymity, confirmed key elements of the transaction.

John Fondale, a senior vice president with TRI Commercial Real Estate's Sacramento office, said Walton Street Capital is making a "significant investment in the Sacramento market. It's a good mixture of product, from small, incubator-sized buildings to much bigger buildings."

He added that Sacramento is dominated by local industrial developers who hold properties they build, so it's rare when an outside institutional investor buys into the market here.

The Chicago Tribune, citing Walton Street chief executive Neil Bluhm, reported that the deal involved 95 properties, mostly concentrating on warehouses near ports in Southern California, a play to capture revenue from increased foreign imports.

"We've heard it's more than 20 million square feet," Fasulo said of the overall transaction, which also involves properties in Phoenix, Seattle and Portland, Ore. "On a per-square-foot basis, that's over $100 a foot. It's pretty expensive for industrial property."

Eastdil Secured Capital of San Francisco is the listing agent for the seller, and offices of Grubb & Ellis and Cornish & Carey Commercial are helping with the sale. Colliers International is representing Walton Street.

This article about Chicago-based Walton Street Capital appeared in the May 18, 2007 issue of The Sacramento Business Journal.

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