CalPERS Sheds LaSalle of Industrial RE Portfolio

The country's biggest public pension fund has transferred most of its CalEast Global Logistics industrial real estate portfolio to private investment firm GI Partners from LaSalle Investment Management.

(December 2, 2010) — As part of its ongoing reorganization of its real estate portfolio, the $216 billion California Public Employees’ Retirement System (CalPERS) has announced that it is switching managers for $1.96 billion of its industrial property holdings.

“The restructuring process will be continuing through the next several months,” CalPERS’ Clark McKinley told aiCIO. “There are tentative transitions that entail portfolio shifts to other, higher performing managers in the CalPERS portfolio,” he said.

The fund announced that is has shifted its CalEast North America Global Logistics industrial real estate portfolio to GI Partners and RREEF Investment GmbH, replacing LaSalle Investment Management of Chicago. RREEF will manage CalPERS’ $60 million of CalEast European industrial assets.

“We have confidence in GI Partners and expect excellent performance from the CalEast portfolio going forward, given their strong returns since they joined our real estate program in 2001,” said Ted Eliopoulos, CalPERS Senior Investment Officer, Real Estate, in a statement on the fund’s website. “RREEF’s success with CalWest and their global breadth and expertise will be valuable in managing CalEast’s European assets.”

Since the fund’s real estate division fell 11% in the past fiscal year through June, CalPERS has been working on terminating underperforming real estate managers in an attempt to restructure by shifting assets to managers who outperformed peers during the real-estate downturn. CalPERS’ McKinley added that besides adopting major policy changes for debt limits and due diligence, the firm is also planning to have a higher percentage of its real estate portfolio in income-generating core properties rather than the opportunistic sector, which has involved locking up capital in development projects that have relied on excessive borrowing.

In recent news, the fund dropped a unit of BlackRock in October as the manager of its $1 billion of holdings in residential apartment buildings. The action comes after CalPERS was forced to write off an investment with BlackRock over failed property investments.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742