Sacramento County Puts BlackRock on Watch List

By Jon Peterson

Sacramento County Employees’ Retirement System has retained Atlanta-based Mercer Investment Consulting to review its portfolio of real estate investments under the management of BlackRock Inc.

“There was a concern by us and Mercer about the future ability of BlackRock to manage the portfolio with the recent departure of Fred Lieblich as a top executive with the real estate manager,” said Richard Stensrud, chief executive of the retirement system, which has $5.2 billion in assets, 15 percent of which is invested in real estate.

The placement on the watch list indicates that the pension fund intends to scrutinize the asset manager at a heightened level, including a review of the portfolio’s performance to date and an evaluation of how well the asset manager might be expected to perform without Lieblich going forward.

Lieblich was a managing director at BlackRock and global chief-investment officer of BlackRock Realty. He came to BlackRock via SSR Realty Advisors, where he had been president and chief executive officer. In 2004, BlackRock Inc. bought SSRM Holdings, parent of State Street Research & Management Company and SSR Realty. With the acquisition, Lieblich became chief investment officer leading the combined real estate operations of BlackRock and the former SSR Realty. Lieblich has retired.

BlackRock Realty has a San Francisco acquisitions office and is an advisor for both the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. CalPERS has BlackRock as a separate-account manager of apartments through its Western Multi-Family partnership, a core portfolio valued at $1.1 billion through the third quarter of 2009, the most recent date available.

BlackRock Realty declined comment for this story.

The asset manager now oversees three separate real estate portfolios for Sacramento County. The total value of the three was $235 million at the end of last year, the most-current number available. The investments are held in two separate accounts and one commingled fund, according to public records. A separate account is a partnership between the asset manager and one, typically institutional investor. A commingled fund consists of investments from multiple parties overseen by a single manager. One Sacramento separate account with BlackRock is valued at $116.2 million and the other at $83.6 million. Together, the two own 12 properties located across the United States.

Sacramento County also holds an investment in the BlackRock Granite Property Fund, which mostly invests in fully leased office, industrial, retail and apartments around the country. It also makes some investments in apartments on a forward-commitment basis where a buyer commits to acquiring a property before the start of construction but does not take over ownership until the complex is completed and the asset reaches an earlier agreed-upon level of occupancy. The pension fund made a $50 million commitment into the commingled fund in November 2006. It valued the investment at $35 million as of the end of last year, the most recent figure available.

Mercer is expected to return to the board June 17 with the results of its review. Principal Allison Yager and Senior Associate David Nix are to present.

BlackRock Realty owns one property in the San Francisco Bay Area for Sacramento County, the 94-unit Hillsdale Village Apartments in Berkeley at 1797 Shattuck Ave., now valued at $30.9 million. BlackRock has had the asset in the portfolio since February 2008. The complex is two blocks from the University of California, Berkeley.

Sacramento County’s entire real-estate portfolio was valued at $780.2 million through the end of 2009, the most recent period available. The pension fund has total membership of 25,550. Sacramento County paid $232.3 million in benefits in fiscal year 2008-2009.

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