From Top 1000 Funds:
Funds chase the dragon
Institutional investors are turning their attention to Asia, with CalPERS the latest large pension fund to announce a new foray into the region.*From CalPeensions:
America’s biggest public pension fund this week announced it would invest $530 million in two new real-estate funds targeting investments in China.
Despite concerns about a residential property bubble in China, CalPERS’ chief investment officer Joe Dear says that the $238.2-billion fund sees the urbanisation and income-growth trends in the country underpinning the strength of its real estate.
“Income growth and urbanisation remain the key themes for growth in China,” Dear says.
“China’s office and retail sectors offer stable rental income and potential for capital value growth.”
Faced with a laggard US economy and Europe slipping into a grinding recession, large institutional investors are increasingly looking to the Asian region for returns.
The Canadian Pension Plan Investment Board has a long-term relationship with specialist listed-property fund manager, Goodman Group.
Investments include industrial and logistically focused investment in China, Australia and Hong Kong. The ongoing partnership has recently been expanded to investments in greenfield sites in North America.
The $43-billion industry super fund AustralianSuper has also set its sights on Asia and, in particular, China....MORE
...Here are brief descriptions from various news sources of some well-publicized CalPERS real estate losses.
–LandSource: CalPERS paid $970 million in January 2007 for a majority stake in a Lennar Corp. development on the 15,000-acre Newhall Ranch north of Los Angeles. The project declared bankruptcy 15 months later. CalPERS severed ties with the advisor that recommended the investment, MacFarlane Partners of San Francisco.
–Stuyvesant Town and Peter Cooper Village: CalPERS invested $500 million in the $5.4 billion purchase by Tishman Speyer and BlackRock of 11,227 apartments on 80 acres in New York City. The plan was to replace rent-controlled tenants with market rents. But the courts objected, and the owners defaulted on a loan.
–Centerpoint: A CalPERS operative, CalEast, paid $3.4 billion in January 2005 for the largest industrial landlord in the Chicago area. An analyst told Forbes he thought CalPERS paid $900 million more than the value of the property, apparently to get the Centerpoint management team. CalEast value plunged in the economic downturn.
–East Palo Alto: CalPERS invested $100 million in a Page Mill Properties plan to upgrade 1,700 rent-controlled units and charge market rents. Critics said 1,500 low-income tenants were displaced. After a complex legal battle, the lender foreclosed.
–Columbus Center: CalPERS invested $91 million in a plan to build condos, hotel rooms and stores over a section of the Massachusetts turnpike in Boston, triggering a 13-year battle with neighborhood opponents and 130 community meetings. Opponents want CalPERS to pay $4 million to $5 million to clean up the partially excavated site.
–Capitol Mall Towers: CalPERS invested $100 million in April 2006 in a proposal for twin 53-story condo towers and a hotel in Sacramento, not far from CalPERS headquarters. As the real estate bubble burst, CalPERS bought out the developer 14 months later for an undisclosed sum and still owns the undeveloped block.
–Koin Center: CalPERS and a partner paid $109 million in 2007 to buy the bottom 19 floors of a landmark building in Portland, known as the “mechanical pencil” because of its shape. Last July they defaulted on a $70 million mortgage and gave up ownership.