It's official: CalPERS loses $500 million on New York apartment deal
The California Public Employees' Retirement System officially has lost a $500-million stake in the biggest deal ever in the U.S. for a single piece of residential property.
The owners of Stuyvesant Town and Peter Cooper Village, a complex of 56 buildings with 11,000 rental units near the East River in Manahattan, have agreed to turn the property over to creditors after defaulting on $4.4 billion in debt.
CalPERS had committed 26.5% of the partnership led by Tishman Speyer Properties and Black Rock Inc., one of the fund's real estate investment advisors. "This was one of our investments when the real estate market was peaking during 2005 and 2006," said Clark McKinley, a CalPERS spokesman. "Performance was negatively affected by the aftershock of the market collapse."
CalPERS wrote its Stuyvesant stake down to zero in March, said Chief Investment Officer Joseph Dear. "There were negotiations about how it terminates, but we didn't expect to receive any value on that."
The loss in the New York City apartment market was the most spectacular blowup in what had been a horrendous 2009 for the $200-billion CalPERS. The fund's real estate portfolio dropped by 47.5%, spurring CalPERS to terminate its relationships with some real estate advisors and to write down many of its holdings to market values.
CalPERS had originally projected that the $5.4-billion deal would net it a 13.5% return over seven years.
The decision by investors to turn the Stuyvesant Town-Cooper Village property over to creditors was first reported by the Wall Street Journal.
-- Marc Lifsher
Photo: Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan. Credit: Mary Altaffer / Associated Press