CalPERS is spending big money on a real estate deal again – but don't call it a risky bet.
The pension fund is in discussions to buy Woodfield Mall in Schaumburg, Ill., the biggest mall in the Chicago area and one of the premier malls in the country.
At around $500 million, the purchase would be one of the priciest shopping mall acquisitions in years. In spite of the price tag, experts said it fits perfectly with CalPERS' focus on steering its real estate dollars toward safe investments in the wake of the market crash.
"There are not many places on earth that provide as safe or steady a return" as Woodfield, said Dan Fasulo, managing director at Real Capital Analytics, a market research firm in New York.
The California Public Employees' Retirement System is working on the deal with Miller Capital Advisory Inc., a Chicago-area firm that is in partnership with CalPERS on about $2 billion worth of shopping centers already.
The partnership already owns a 50 percent share of Woodfield and is negotiating to buy the remaining half from a General Motors Co. pension fund.
"This is a trophy asset – this is among the best regional centers in the country," Miller President Andrew Miller said Thursday.
The newspaper Crain's Chicago Business, which first reported on the deal, said the CalPERS group expects to pay around $500 million for the half share. Miller said the figure is "in the ballpark" but he declined to offer more specifics.
CalPERS declined comment other than to say a deal is pending.
Crain's said the deal would value the entire mall at around $1 billion, or $900 a square foot. That would make it one of priciest mall sales in the country in the past decade.
Nonetheless, analysts applauded the move.
"Woodfield would probably fall into the top 10 U.S. malls," said Garrick Brown, research director at Cassidy Turley Commercial Real Estate Services in Sacramento.
CalPERS invested heavily in speculative real estate deals – unbuilt housing projects and such – and lost billions when the market collapsed.
Since then it has redirected its portfolio toward more conservative deals, such as leased-up office buildings.
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