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It's a very common practice for pension funds to invest in commercial/industrial/office real estate. You'll be surprised how many large commercial office buildings are owned by pension funds. Unless something underhanded is going on (kickbacks, bribes, nepotism, etc) purchasing these types of real estate as a long-term investment is considered appropriate and proper practices for pension funds.
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Omigosh. An office development in Carlsbad. In fact, anything in Carlsbad.....I think it will hold its value! Want me to drive over and look at it?
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ha ha aha haha, Glen thanks for the laugh it was GREAT!!ROTF
mella l
mella l
Art and Science
bytheSEA
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I got a chuckle out of the fact that the los Angeles city employees retirement fund owned the(old) Ritz carleton in Pasadena.
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Bob Orts is exactly right. I was a board member on the Kern County Employee's Retirement Association from 1986 to 1992, representing the employee's interests. A nine-member board, four of the board members are elected by the employees and retirees, four are appointed by the local County Board of Supervisors to represent the taxpayers, and the ninth member, by law, is the county Treasurer/Tax Collector.
One of the things that we did was to invest $600 million (at that time, the fund has since doubled to over $1.2 Billion now, I believe). We had an investment plan created with the help of our consultant, Wilshire Associates. We had a diversified portfolio of stocks, bonds, money market instruments (cash), real estate, currency hedge funds, venture captial, etc. In the real estate portion of our investments, we looked for investment-quality properties, mostly apartment complexes and office buildings, but at one time we owned the Henry-Mayo Hospital in Newhall, CA.
Yes, if the value of the property decreases, the value of the asset decreases, but there is a loss only if the property is sold while the value is down. The same is true of every other investment that we made. When stocks were down, the value of the pension fund decreased, at least on paper. When the bond market went south, the value of the pension fund decreased. The losses are never actualized until the assets are sold. The purpose of having a diversified portfolio is that on average, not all sectors of the markets would be down all at the same time. Real estate is a legitimate investment for institutional investors.
On average, our pension fund performed at a rate of about 8% per year, which is not too shabby. On a $600 million fund, we earned about $64 million per year. Some years more, some years less, but we never actually lost money over the course of a year.
How do I know?
Aloha! ;-)
