Business & Real Estate

CalPERS makes huge New York real estate deal

CalPERS has completed the purchase of this New York office building for $1.9 billion
CalPERS has completed the purchase of this New York office building for $1.9 billion CommonWealth Partners

CalPERS has completed one of the biggest real estate investments in its history, purchasing a New York office tower for $1.9 billion.

The big pension fund confirmed Tuesday it has bought the 50-story Manhattan office building, saying the deal is emblematic of its focus in recent years on purchasing real estate properties that are already generating revenues.

The deal closed Jan. 27, said spokesman John Cline of AXA Financial, the financial services conglomerate that sold the building.

Various New York media reports put the purchase price at $1.9 billion. That represents one of the priciest real estate investments CalPERS has ever made, and one of the largest deals in New York history.

AXA and CalPERS wouldn’t comment on the price.

Despite the hefty price tag, the purchase is in line with the more conservative investment strategy adopted in recent years by the California Public Employees’ Retirement System.

In particular, the pension fund has overhauled its real estate portfolio after losing billions in the real estate crash in 2008. The pension fund is undertaking fewer speculative deals from the ground up and plowing most of its money into commercial properties that are open for business and mostly, if not completely, leased up. The New York building is reportedly 98 percent leased.

“The acquisition follows our real estate strategic plan to invest in core, income generating properties,” said CalPERS spokesman Joe DeAnda in an email. The pension fund made the purchase with one of its outside real estate partners, CommonWealth Partners of Los Angeles.

The deal amounts to 7 percent of CalPERS’ real estate portfolio but just a fraction of 1 percent of its total asset base of $274.89 billion.

CalPERS has done billions of dollars worth of deals with CommonWealth since the late 1990s.

The pension fund hasn’t completely abandoned riskier speculative deals. Last week, along with its partner CIM Group, the pension fund unveiled preliminary plans for a 30-story mixed-use tower at the so-called “hole in the ground” vacant lot in downtown Sacramento. CIM said the project probably wouldn’t break ground until early 2018.

Dale Kasler: 916-321-1066, @dakasler