The California Public Employees’ Retirement System will terminate LaSalle Investment Management as the overseer of its CalEast Global Logistics account.
The public pension fund entered the joint venture investment program with LaSalle in April 1998 to focus on investment in industrial properties in the Eastern half of the country as well as Europe, Canada and Mexico.
At its peak in 2005 and 2006 the separate account had total plan assets of $6 billion. CalPERS last valued CalEast at $1.52 billion in June 2009, the most current valuation the pension fund has disclosed. The most recent performance of the account has been less than stellar, according to the returns posted on CalPERS’ Web site by real estate consultant Pension Consulting Alliance. Since inception, the fund has lost 4 percent of its value with a nearly 60 percent loss in the year to June 2009. The returns are not inflation-adjusted and are before any fees have been paid.
San Francisco-based RREEF Funds LLC manages CalPERS’ CalWest, another separate account that focuses on the Western half of the United States. The value of CalWest Industrial Investors LLC was $230.4 million through June 2009. This represented 4.4 percent of the pension fund’s core portfolio. The current quarter returns are -33.6%, one-year -27.4$, three-year 4.8% and five-year 26.3%. The fund invests in industrial properties in the western US markets.
Both CalPERS and LaSalle declined comment for this story. A pension fund spokesperson said in an email message that it was not commenting on the future of its relationships with any of its money managers. LaSalle said it had no comment at this time. It has not been established which manager will take over the portfolio for LaSalle, though one possibility is San Francisco-based Stockbridge Capital Group.
A separate account is an investment entity that includes a single pension fund and a real estate manager. It compares to a commingled fund in which multiple investors place money to be managed by a single agent.
LaSalle Investment Management is based in Chicago while CalEast Global Logistics is based in Orlando, Fla.
LaSalle had total assets under management of $39.9 billion through September. Other pension funds that have placed money with the manager include the Ohio Police and Fire Pension Fund, Teacher Retirement System of Texas and the Oregon Public Employees Retirement Fund.
As of June, CalEast represented 29 percent of CalPERS’ $5.3 billion core real estate portfolio. Core assets are supposed to be the most conservative and least volatile of any class. By definition, they are expected to deliver the lowest returns. They contrast with value-added real estate holdings and opportunistic real estate holdings, the riskiest but highest yielding when they work.
The value of CalPERS’ total real estate portfolio is $13.4 billion.
CalEast has had a history of investing in individual properties, portfolios and one public company. In April 2005 it acquired 90 properties known as the Aeroterm portfolio for around $600 million. The purchase consisted of 90 distribution facilities covering 5.5 million square feet and 4.3 million square feet of ramp-side space at 25 airports across the Untied States and Canada. None of these properties were in the San Francisco market. A year later it paid $3.4 billion to acquire Oakbrook, Ill.,-based CenterPoint Properties, a publicly traded real estate investment trust.
CalPERS last allocated capital to CalEast in 2008 when it placed $300 million into the account.