CALPERS Takes 23.6% Decline on the Chin

23.6% is child's play. We have already seen Broadway partners default on the Hancock center in Boston which fetched less than 50% of what Broadway had paid just two years earlier. We will start to get into major trouble when core/trophy/class A properties with bellwethers like a major law firm or even state or federal governments see their tenants cut back on space needs.

Tanking Real Estate Values Take Toll on Pension Funds

Public pension funds are under enormous pressure to claw back a seemingly endless decline in the value of their real estate investments. The extent of the damage is revealed in the release of a few of the larger funds’ annual reports.

The nation’s largest pension fund, the California Public Employees’ Retirement System (CalPERS), has reported a litany of recent troubles.

The bellwether institutional investor reported that the value of total assets under management at the end of June was $180.9 billion, down from $237 billion a year earlier, or a drop of 23.6%.

Real estate values accounted for the biggest chunk of the decline, falling 35.8% during the period, followed by private equity with a 31.4% decline.

In July, CalPERS’ joint venture with Houston-based Hines defaulted on a $152 million mortgage secured by three office buildings in Emeryville, Calif. The buildings, totaling 814,000 sq. ft., are part of the 1.2 million sq. ft. Watergate office complex. A fourth building on the site is owned by a separate entity, Hines REIT, and is not part of the default.

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