Private Equity Firm Targets Bay Area Industrial
Submitted December 14, 2011, 6:45 PM
Depressed Bay Area industrial property values are drawing the eye of a Pennsylvania private equity real estate firm that has shunned the region historically because its principals believed prices were too high.
Plymouth Meeting, Pa.,-based Exeter Property Group has $404 million in equity to invest across 10 primary U.S. industrial markets. The company will target the Oakland and San Francisco areas as well as Southern California as two of the 10 markets where it expects to dedicate at least 66 percent of the equity in the venture.
“In the past, San Francisco was a region that we considered less desirable for investment. We felt the market as a whole was a little on the pricey side," said Ward Fitzgerald, Exeter chief executive and managing principal. "In the recent cycle, we have seen the properties being re-priced, which has made them more attractive for us.”
Barney Sinclair, a principal and investment officer for Exeter in Texas, previously was an associate in Northern California for Dallas-based Trammell Crow Co. Fitzgerald also invested in Northern California while at Rouse & Associates, now Pennsylvania-based Liberty Property Trust.
Exeter will buy on behalf of the Exeter Core Industrial Venture. The New Jersey Division of Investment, a public pension fund with an estimated $70 billion in assets, has committed $200 million to the Exeter venture. An unidentified sovereign wealth fund has put up another $200 million. Exeter employees are contributing $4 million.
The primary focus will be on cash-flowing assets leased to credit tenants that can generate stable returns as key regional distribution hubs.
The venture hopes to gain cash yields of 7 percent to 7.5 percent and leveraged, gross internal rates of return between 9 percent and 12 percent. “For us this means buying a property at a cap rate of around 6 percent and then putting on leverage in the range of 40 percent,” Fitzgerald said.
The company plans to start buying next year and to keep buying through 2014.
