Investment in equity real estate by Pensions & Investments' top 200 pension plans increased 8% to $115.6 billion in the 12 months ended Sept. 30.
When adjusted for the 19.2% gain by the NCREIF Property Index during the period, however, the assets dropped 9.2%. This is a larger dip from the year-earlier period, when the top 200's collective real estate portfolios dropped 6% on a market-adjusted basis.
While some pension plans continued to sell plum holdings, 2005 was the year of the pension fund as a buyer — at premium prices.
For the past several years, pension funds were shut out of some of the best deals by foreign and high-net-worth investors willing to take on more risk and higher prices to win a property bidding war. But last year, real estate managers and consultants said, fear of interest rate increases chased away competitors, leaving pension plans, and the funds in which they invest, the winning bidders for large, expensive portfolios.
Here is a sample:
• The $87 billion New York City Employees' Retirement System in a joint venture with Tishman Speyer Properties, Boston, bought the MetLife building for $1.72 billion, the nation's largest office deal in 2005;
• LaSalle Investment Management Inc., Chicago, and the $200.7 billion California Public Employees' Retirement System, Sacramento, sold $1.4 billion in warehouses to RREEF America II Fund, in which $25 billion Public School Retirement System of Missouri, Jefferson City, is an investor.