CalPERS Writes Off Stake in Big Apple Apt. Complex

January 25, 2010 (PLANSPONSOR.com) – With the owners of a giant New York City apartment complex deciding to turn the keys back over to their creditors, the California Public Employees' Retirement System (CalPERS) has lost its $500-million stake in the deal.

The Los Angeles Times reported that CalPERS wrote off its 26.5% stake in Stuyvesant Town and Peter Cooper Village last year as the complex of 56 buildings with 11,000 rental units struggled under its $4.4-billion in debt and the impact of the down economy. Purchase of the development was considered the biggest deal ever in the U.S. for a single piece of residential property.

At the time it made the investment, CalPERS estimated it would enjoy a 13.5%-return over seven years.

"This was one of our investments when the real estate market was peaking during 2005 and 2006," Clark McKinley, a CalPERS spokesman, told the Times. "Performance was negatively affected by the aftershock of the market collapse."

According to The Times, the value of CalPERS’ real estate portfolio dropped by 47.5%, spurring CalPERS to drop some real estate advisers and to write down many of its holdings to zero market values (see CalPERS to Terminate Managers over Real Estate Losses).

Returning the development to its creditors was considered an alternative to foreclosure proceedings (see Pension-Backed NYC Investment could be in Foreclosure by 2010).  CalPERS was not the only large pension fund with a stake in the Stuyvesant project (see Fla. Pension’s NYC Real Estate Deal Goes Sour).

Fred Schneyer
editors@plansponsor.com