The Housing Chronicles Blog: CalPers realizes huge land investment losses

Wednesday, November 12, 2008

CalPers realizes huge land investment losses

The pension fund for California public employees, commonly known as CalPers, made some huge bets on land investments in multiple states and was a primary source of funding for land developers. But as values for residential land has cratered, it looks like the fund will lose more than 100% of its investment as well as a steady exodus of top executives. From a Wall Street Journal story:

The nation's largest public pension fund, known as Calpers, is paying dearly for its ill-fated decision to become one of the most aggressive real-estate investors among public pensions.

Amid the rapid decline in the housing market, the value of Calpers's investments in land and housing projects across the country had fallen 35%, to about $6 billion, as of June 30, according to recent performance results released Wednesday by the California Public Employees' Retirement System.

The losses are likely to be larger now because the values were based on appraisals completed at the end of March. Since then, land values have cratered nationwide, as evidenced by the bankruptcy-protection filing of one high-profile Calpers undertaking, the LandSource land venture in California. An investment vehicle funded by Calpers sank $970 million in that venture, which holds 15,000 acres outside Los Angeles.

For the quarter ended June 30, Calpers says it expects a loss even greater than 100% for its once high-yielding land and housing investments, thanks to its use of borrowed money on deals. The losses also dragged into negative territory the quarterly returns on its overall $22 billion real-estate portfolio, typically one of the pension fund's most profitable...

Calpers has been operating with interim officials in its two highest positions, as former Chief Executive Fred Buenrostro and former Chief Investment Officer Russell Read left midyear. Including them, seven of Calpers's 50 senior officials have left or intend to leave by year-end.

Click here for full story.

1 comment:

W.C. Varones said...

CalPers was lying about its investment performance.

Who coulda knowed?