Why the state's investment arm bought a Raleigh office building
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The two-tower Bloc[83] development in downtown Raleigh. Photo: Bloc[83]
A pair of Raleigh's newest office towers has been sold for $210 million — a significant decrease from the record sum of $330 million the two towers fetched in 2022.
Why it matters: The new owner is a partnership between Raleigh's largest landlord, Highwoods Properties, and the North Carolina Investment Authority, an entity formed last year by state law to manage investments for the state's pension plan.
- Previously, the state's pension plan's investments were decided solely by the state treasurer. Now, a five-person board directs its strategy, including this latest move to diversify its investment assets.
Zoom in: The Bloc[83] towers — two 10-story office buildings totaling nearly 500,000 square feet of space — are 97% leased, a strong number for a downtown office market hit hard by remote work. They were completed between 2019 and 2021.
- Tenants include: WeWork, Envestnet and McAdams, as well as dining options like Incendiary Brewing and Dram & Draught.
State of play: State Treasurer Brad Briner said he viewed the deal as a chance to acquire premium office buildings at a low valuation, while they continue to create consistent revenue every month from tenants.
- Highwoods, which approached the state about the deal, will manage the asset, though the N.C. Investment Authority will initially own a 90% share of the towers.
- Briner said the state pension fund used cash that was earning around 3% in interest to buy the tower. He expects a return of 8% or more on Bloc[83].
The big picture: Briner said the partnership is a sign that the state's $143 billion pension fund is ready to strike more business partnerships and invest in a wider array of assets.
- Briner, during his election campaign last year, criticized former state treasurer Dale Folwell for being too conservative with investments and missing out on potential returns by holding too much cash.
- North Carolina's pension plan had some of the lowest returns of any state during Folwell's time, according to analysis from Yale University, and Briner wants to see 6.5% annual returns for the pension plan.
- Already, it has benefited significantly from a bull market that has sent stocks soaring in the past year.
What they're saying: Briner said he wants to see the N.C. Investment Authority strike more partnerships going forward, and has worked since his election to signal the state is open for business.
- "It is not my opinion that we've been closed for business. It's a fact that we were closed for business," Briner said of the pension plan's previous management.