CalPERS is in danger of losing $500 million on a New York real estate deal, the latest in a series of major investment setbacks.
The deal was costly to California's other big public pension fund, too. CalSTRS said it has already written off its $100 million investment.
The two funds were among the major investors in a group that purchased a Manhattan apartment complex called Peter Cooper Village and Stuyvesant Town for $5.4 billion in 2006.
The investment is about to go bust. The Wall Street Journal reported Wednesday that the complex, owned by a partnership led by Tishman Speyer Properties and BlackRock Inc., might soon go into default. Quoting anonymous sources, the paper said the partnership could run out of cash in two months. It also said the property's value has sunk to an estimated $2.1 billion.
Investors were banking on Tishman Speyer's ability to raise rents, even though most of the units are subject to New York rent controls. But the investment fell flat when the economy slowed.
Other big investors included the Government of Singapore Investment Corp. and the Church of England, according to the newspaper.
Clark McKinley, a spokesman for the California Public Employees' Retirement System, confirmed that the fund put $500 million into the project in November 2006.
He declined to say whether CalPERS has written off any of the investment but added that it has declined to increase its investment.
"We're not putting any more money in (the project) at this time," he said.
The California State Teachers' Retirement System wrote off its investment in the fiscal year that ended June 30, said spokeswoman Sherry Reser.
The two funds lost a combined $100 billion during the latest fiscal year. Much of the loss was in stocks and other financial instruments, but both funds have suffered hits to their real estate portfolios as well.
CalSTRS' real estate holdings fell 43 percent during the year. Meanwhile, CalPERS lost nearly $1 billion on one real estate deal alone, a massive housing investment known as LandSource, which went into bankruptcy reorganization.
Call The Bee's Dale Kasler, (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs.
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