CalSTRS and First Industrial Realty Trust Inc. are aiming to get ahead of a new trend.
Large retailers such as Wal-Mart Stores Inc., Bentonville, Ark., are looking into establishing manufacturing sites close to home that they can use in case overseas shipments of goods are delayed by events such as natural disasters like Hurricane Katrina, which can shut down deep-water ports and slow the shipment of goods.
Last month, the $142.8 billion California State Teachers' Retirement System, Sacramento, and First Industrial, Chicago, created a $950 million joint venture to rehabilitate and redevelop properties and buy vacant land in areas where they expect demand by manufacturers for industrial or warehouse sites, explained Sean O'Neill, First Industrial's senior vice president. Investments will be made at the ratio of 35% equity and 65% debt, bringing the venture's buying power to around $1.6 billion.
Retailers are looking into moving from a just-in-time model — receiving goods just as they're needed, which reduces the quantity of stock that has to be stored — to more of a "just-in-case" model, Mr. O'Neill said. "Manufacturers are looking at alternatives so they don't have empty shelves. We're going to buy land where demand will be strong as companies reconfigure their supply chains."
This will be a revolving fund. Over the 10-year life of the joint venture, profits will be returned to the fund to be used to make other purchases rather than distributed to the partners, he explained.