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Aug 10, 2009 2:44 PM, By Ben Johnson
(begin excerpt)
The nation’s largest pension fund, the California Public Employees’ Retirement System (CalPERS), has reported a litany of recent troubles.
The bellwether institutional investor reported that the value of total assets under management at the end of June was $180.9 billion, down from $237 billion a year earlier, or a drop of 23.6%.
Real estate values accounted for the biggest chunk of the decline, falling 35.8% during the period, followed by private equity with a 31.4% decline.
In July, CalPERS’ joint venture with Houston-based Hines defaulted on a $152 million mortgage secured by three office buildings in Emeryville, Calif. The buildings, totaling 814,000 sq. ft., are part of the 1.2 million sq. ft. Watergate office complex. A fourth building on the site is owned by a separate entity, Hines REIT, and is not part of the default.
NOP Watergate LLC, the joint venture that defaulted on the buildings, paid $335 million for the buildings and a separate restaurant in late 2006, at what most observers consider to be the height of the market. Now it is surrendering the property to the lender, Pacific National Bank. It is unclear what strategy the bank intends to pursue.
In another stinging and unprecedented move, New York-based rating agency Moody’s Investors Service placed its AAA-rating on CalPERS under review.
Despite its multitude of travails, CalPERS is certainly not alone in the “falling values” department. The California State Teachers’ Retirement System (CalSTRS), another institutional bellwether, reported that its total asset values fell by 25% in the fiscal year ended June 30, to $118.8 billion.
The value of CalSTRS’ real estate assets fell by an astounding 43% during the year, due largely to the fund taking a large write-down on its assets for 2008 rather than spread out the pain over a few years.
“We’re now in the position to turn around our real estate returns with new, creative strategies, including acquiring high-quality assets from distressed sellers at attractive discounts,” says chief investment officer Christopher Ailman.
Farther east, the Ohio Public Employees Retirement System saw its total assets grow by 3% to $50.2 billion year-to-date through June 30, but real estate was a big drag on its results. The fund’s real estate assets, which account for about 8% of the fund’s total assets, dropped 12.2% during the same period to approximately $4.2 billion. The decline was beat only by the drop in private equity holdings, which declined 18.22% for the year.
cont...
(begin excerpt)
The nation’s largest pension fund, the California Public Employees’ Retirement System (CalPERS), has reported a litany of recent troubles.
The bellwether institutional investor reported that the value of total assets under management at the end of June was $180.9 billion, down from $237 billion a year earlier, or a drop of 23.6%.
Real estate values accounted for the biggest chunk of the decline, falling 35.8% during the period, followed by private equity with a 31.4% decline.
In July, CalPERS’ joint venture with Houston-based Hines defaulted on a $152 million mortgage secured by three office buildings in Emeryville, Calif. The buildings, totaling 814,000 sq. ft., are part of the 1.2 million sq. ft. Watergate office complex. A fourth building on the site is owned by a separate entity, Hines REIT, and is not part of the default.
NOP Watergate LLC, the joint venture that defaulted on the buildings, paid $335 million for the buildings and a separate restaurant in late 2006, at what most observers consider to be the height of the market. Now it is surrendering the property to the lender, Pacific National Bank. It is unclear what strategy the bank intends to pursue.
In another stinging and unprecedented move, New York-based rating agency Moody’s Investors Service placed its AAA-rating on CalPERS under review.
Despite its multitude of travails, CalPERS is certainly not alone in the “falling values” department. The California State Teachers’ Retirement System (CalSTRS), another institutional bellwether, reported that its total asset values fell by 25% in the fiscal year ended June 30, to $118.8 billion.
The value of CalSTRS’ real estate assets fell by an astounding 43% during the year, due largely to the fund taking a large write-down on its assets for 2008 rather than spread out the pain over a few years.
“We’re now in the position to turn around our real estate returns with new, creative strategies, including acquiring high-quality assets from distressed sellers at attractive discounts,” says chief investment officer Christopher Ailman.
Farther east, the Ohio Public Employees Retirement System saw its total assets grow by 3% to $50.2 billion year-to-date through June 30, but real estate was a big drag on its results. The fund’s real estate assets, which account for about 8% of the fund’s total assets, dropped 12.2% during the same period to approximately $4.2 billion. The decline was beat only by the drop in private equity holdings, which declined 18.22% for the year.
cont...
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