Prologis Gets $500MM from Oregon Pension Fund

Submitted August 3, 2011, 7:31 PM

Jon Peterson

San Francisco-based Prologis Inc. has secured a $500 million commitment from the Oregon Public Employees Retirement Fund for its Prologis Global Strategic Venture, a separate-account relationship between the two organizations. The pension fund is the sole outside investor.

“The driving force for us is that we wanted to become involved with a leading player on a global basis with industrial properties, and Prologis made the most sense,” said Brad Child, senior investment officer for real estate for the Oregon retirement fund.

Prologis completed its merger with the former AMB Property Corp. on June 3, and the combined company has taken the Prologis name. Its headquarters remains in San Francisco.

Prologis owns, operates and develops industrial property in the Americas, Europe and Asia. As of June 30, it owned or had investments in properties and development projects expected to total approximately 600 million square feet in 22 countries. It has more than 4,500 customers including third-party logistics companies, retailers, manufacturers and transportation companies.

“We initiated talks with AMB about this investment idea two years ago. There was an interest at that time, but it was put on hold once the real estate and financial markets fell apart,” Child said.

Child also arranged separate-account relationships with both Prologis and AMB when he was with the Government of Singapore Investment Corp. before he started work for Oregon.

The structure of the separate account calls for Oregon to control which investments it makes with Prologis. The first of these will be a $75 million commitment to the Europe Logistics Fund, a core open-ended fund that will invest in industrial properties in Europe. It’s likely that this capital will not be called by the manager for another six months.

“There could be some situations where for whatever reason we choose not to invest. This will be a decision that we will make on our own and have control over,” says Child.

Part of the $500 million investment calls for Oregon to have up to 15 percent of the capital held in Prologis stock. “We like this feature as it would allow us to get some capital invested overnight, and it can be moved in and out of the venture quickly,” Child said. There is no indication at this time when the stock in Prologis will be purchased.

Oregon believes it is under-allocated to industrial assets. Through the end of 2010, the pension fund had 10 percent of its real estate portfolio in industrial properties.

In its private capital business, Prologis has $26 billion in assets under management in 22 funds and ventures around the world, Chief Executive Hamid Moghadam told analysts on the company's second-quarter conference call July 28. It hopes to expand that business in the long term, though Moghadam told analysts that in their current configuration, not all of those funds are profitable. "Some provide fee structures that fall short of our cost of managing the fund assets," he said.

In some case that will mean ending or restructuring those funds, he said. In the short term that may mean a fall in the number of funds and a drop in the total assets under management. However, he said, in the longer term the company expects the business to grow. “Over the next 18 months, we plan to add to our capacity by forming a few new funds, as well as raising incremental capital for existing open-end funds in the United States and Europe," he said.

Moghadam told analysts that Prologis had finalized the Oregon commitment only one day before the call. He described the Oregon fund as "one of the most-respected pension funds in the country."

The Oregon system has 328,000 members. In 2010 it paid benefits of $3 billion with $2.6 billion going to Oregon residents.


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