CalPERS Acts to Boost Real Estate Sector

The giant California Public Employees’ Retirement System on Tuesday moved to shore up one of its lackluster investment categories--real estate--by delegating more authority to its new property investment chief.

Also Tuesday, the retirement fund confirmed that its assets have topped $100 billion for the first time.

Sacramento-based CalPERS said its board of administration voted Tuesday to give David Gilbert, the fund’s new senior investment officer for real estate, the power to implement a strategic plan for revamping the fund’s $5.7 billion in real estate investments.

The plan, however, isn’t yet in place: Gilbert, formerly at the investment firm J.P. Morgan, is expected to take the next few months to review all of CalPERS’ properties, then recommend a program that could include paring some of the outside investment firms that currently oversee those properties.

CalPERS has been criticized for taking nearly two years to review its far-flung real estate investments, in a period when returns from real estate generally have been disappointing.

A study completed for CalPERS in April by PCA/KL & Co., a real estate consultant, placed each of the fund’s real estate investment advisors in either a “hold,” “probation” or “termination” category.

After Gilbert presents his restructuring plan--and assuming CalPERS’ board approves it--he will have authority over property transfers, acquisitions and dispositions, and retention or termination of CalPERS’ real estate advisors.

CalPERS’ real estate investments have included a large stake in Catellus Development Corp., a major California landowner. Catellus stock has rebounded this year but remains more than a third below its peak price reached before California property prices began to plunge in the early 1990s.

Meanwhile, CalPERS said Tuesday that its total assets reached the $100-billion milestone on May 14, helped by the stock market’s continuing boom.

The fund, which provides retirement and health benefits for 1 million current and retired California public employees and their families, has seen its assets surge about $33 billion just since 1992, riding the bull market in stocks. Fund assets were just $20 billion as recently as the early 1980s.

“The fact of the matter is that $100 billion and even more will be needed for the increased number of people who will be seeking retirement in the next 20 years,” said Charles P. Valdes, chairman of CalPERS’ investment committee.