CalPERS, shaken by heavy losses in a New York apartment deal recommended by investment adviser BlackRock Inc., is leaning toward severing ties with the firm, the Wall Street Journal reported Wednesday.
The California Public Employees' Retirement System declined comment on the report, which was based on an anonymous source. The pension fund giant acknowledged, however, that it is reviewing the performance of all its real estate managers, "given the current economic environment and new leadership in our investment office."
"We can't speculate on the future of our real estate relationships until the review is complete," CalPERS spokesman Brad Pacheco said.
The $201 billion pension fund paid the New York firm $12.6 million last year in advisory fees, according to the Journal. BlackRock steered a $500 million CalPERS investment to an 11,000-unit apartment complex now considered one of Manhattan's largest-ever real estate debacles.
The CalPERS investment in Peter Cooper Village and Stuyvesant Town is "widely considered worthless," according to the Journal. CalPERS was among investors such as the California State Teachers' Retirement System, the Church of England and the government of Singapore that bought shares in the communities, which were purchased for $5.4 billion by BlackRock and Tishman Speyer Properties at the top of the market in 2006. CalSTRS has written off the $100 million it invested in the deal.
CalPERS, which manages retirement benefits for more than 1.6 million California public employees, retirees and their families, has suffered serious losses across its real estate portfolio during the housing crash.
The pension fund said another longtime partner in its real estate ventures, San Francisco-based MacFarlane Partners, resigned its relationship with CalPERS last month.
In 2007, MacFarlane steered a $947 million CalPERS investment into LandSource Communities Development LLC, then developing Newhall Ranch in the Santa Clarita Valley. The project has filed for bankruptcy protection.
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