CalPERS Dedicates Nearly $500MM to Buy Apartments, Decrease Debt

Jon Peterson

The California Public Employees’ Retirement System has placed nearly $494 million in new commitments with several of its existing real estate partnerships, focusing on apartment acquisitions and the pay down of debt on a shopping center portfolio that it already owns.

The commitments were approved by the pension fund under its “delegated authority” policy. The policy allows CalPERS’ senior real estate investment officer to make decisions without board approval so long as the investments involve existing partnerships and the pension fund’s outlay is below $1.5 billion. CalPERS increased the upper limit of delegated authority to $1.5 billion from not quite $300 million in May.

The additional capital for multifamily and retail properties is aimed at core, or low-risk, assets. The pension fund has adopted a plan to have up to 75 percent of its real estate portfolio invested in core properties.

CalPERS has dozens of partnerships with managers all over the country and world and could have elected to invest additional dollars with any of them. It did not disclose why it selected these two investment types or these two managers to give additional funding. “We are not discussing the reasons behind the new investments,” Wayne Davis, an information officer for CalPERS in its office of public affairs, said in an email message.

The single largest of the new commitments was for $205 million for the CalPERS Western Multifamily partnership with General Investment & Development Cos., a Boston-based real estate investor and developer. GID has a small regional office in Marin County.

GID has managed the Western Multifamily partnership since October 2010 when CalPERS dropped New York City-based BlackRock Realty Advisors from the relationship. The total value of the assets held by the partnership through March 31 was $1.8 billion, according to a CalPERS report issued at its Aug. 15 board meeting. The portfolio represents nearly 23 percent of the pension fund’s total core holdings of $8 billion.

Rich Ross, director of Western regional acquisitions for GID, who works out of the company’s regional office in Larkspur, said the company would use the capital infusion to buy apartments in the Western United States, including the possibility of buying in Northern California. “Some of our recent deals have included purchases in Texas and Maryland,” Ross said.

The other large new commitment, involving not quite $135 million, was to the Global Retail Investors partnership, which is managed by Bethesda, Md., -based First Washington Realty Inc. The capital will be used to retire existing debt on a portion of the portfolio that is coming due in the first quarter of next year, said Jeffrey Distenfeld, an executive vice president with the company.

First Washington primarily buys infill-located grocery- and drug-anchored shopping centers nationwide. Various investors, including Distenfeld, say competition is steep, prices high and capitalization rates low on many such centers now being sold. CalPERS valued its assets with Global Retail at $723.3 million through the end of March. The portfolio amounts to 9.1 percent of the pension fund’s total core portfolio.

First Washington owns 17 California shopping centers. One of its most recent acquisitions was the 20,000 square-foot Alto Center in Mill Valley, which it bought in April for $12 million, according to its Web site. Other Bay Area assets include the Bayhill Shopping Center in San Bruno, the Mariposa Shopping Center in Santa Clara, Pleasant Hill Shopping Center in Pleasant Hill and Ygnacio Plaza in Walnut Creek.

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