CalPERS said Tuesday it plans to sell up to $3 billion worth of real estate as it continues to overhaul its investment portfolio.
The nation’s largest public pension fund said it wants to unload assets “that no longer align with the strategic goals of the real estate program.” CalPERS owns $25.5 billion in commercial, industrial and residential properties.
The decision is in line with the California Public Employees’ Retirement System’s decision to undertake a massive revamp of its land holdings following the market crash, which wiped out nearly $11 billion of value in the CalPERS real estate portfolio. Since then, CalPERS has focused on comparatively safe income-producing properties that have already been built, instead of riskier projects that it would build from scratch. It already has sold off hundreds of millions of dollars worth of properties that didn’t fit with the new vision.
“This is just a portion of that legacy portfolio,” said Joe DeAnda, spokesman for CalPERS. “Because of the favorable market conditions, we’re testing the market.” The pension fund hired Park Hill Group, a national real estate firm, to assist with the sale.
Selling a portion of its real estate also would help CalPERS achieve another strategic goal: reducing the number of outside investment managers it employs. Last month, the pension fund said it would cut in half its outside managers, figuring it can reduce its annual fees by working with fewer firms. CalPERS paid $1.6 billion to outside managers last year.
CalPERS has been making other changes in its $303.25 billion portfolio since Ted Eliopoulos took over as chief investment officer last year. For instance, last fall it said it would sell its $4 billion hedge-fund portfolio.
CalPERS continues to wrestle with some difficult projects in the Sacramento region. For instance, its $1.1 billion investment in Mountain House, a suburb near Tracy, has been jolted by the community’s water shortage. CalPERS has also been mulling options for the “hole in the ground,” a vacant lot it owns near the construction site of the Sacramento Kings’ new downtown arena. The fund has already lost $60 million on the site, which was originally planned to house twin condo towers.
DeAnda said he believes neither of those two projects is scheduled to be sold.