California leavin’: CalPERS cutting RE investment by 50%

“It’s much tighter and a more competitive situation.”
September 15, 2017 06:23PM

Paul Mouchakkaa

The country’s largest pension system is cutting its real estate investments in another warning sign for the New York commercial property market.

The California Public Employees’ Retirement System plans to invest $3.95 billion in real estate in the current fiscal year, which began on July 1. That’s down from $4.6 billion last year and $7.9 billion the year before — a decline of 50 percent in two years, PERE reported.

And CalPERS isn’t alone. Overall pension fund investment in real estate fell to $15.4 billion in the first half of the year, down from $21.9 billion a year earlier, according to FPL Advisory Group.

“Four or five years ago, if we gave [managers] $500 million, 50 percent would be put to work. This year, it’s looking more like 25-30 percent. Prices are moving up,” CalPERS’ managing investment director of real estate Paul Mouchakkaa said in April. “What does that mean for us? It’s much tighter and a more competitive situation.”

CalPERS managed $30.5 billion in real estate as of June 30. Last year it bought the Midtown office tower at 787 Seventh Avenue for $1.9 billion, one of the largest investment sales deals of 2016. [PERE] — Konrad Putzier