Clarion Partners is considering further development projects in the US following the success of its development strategy with Los Angeles County Employees Retirement Association (LACERA).
As part of its build-to-core strategy, Clarion developed two industrial properties in Compton, California, on behalf of LACERA.
According to LACERA鈥檚 board meeting report, the properties, which have recently been valued at $232m, were built for a total cost of $158m. The investment is expected produce an unrealised internal rate of return of 35%.
The 500,000sqft assets, leased to UPS and Best Buy, were financed with a $105m seven-year loan at a fixed interest rate of 3.46%.
LACERA is now expected to hold the asset and place it within its core portfolio.
The projected levered annual cash flow from the stabilised investment is 10% on LACERA鈥檚 cost basis and 4.3% on market value.
Eric Bergwall, managing director at Clarion, said the project in Compton was the company鈥檚 first build-to-core project with LACERA.
鈥淲e have used this strategy as a company in the past with commingled funds that we manage. We will consider doing this more down the road.鈥�
Clarion expects to consider the build-to-core strategy for industrial and apartment properties in the future.
鈥淭here are only a few markets in the US that we would consider doing this for industrial going forward,鈥� Bergwall said.
鈥淚f you can find the right project, we would like to find opportunities in Southern and Northern California, Seattle and South Florida.鈥�
