CALPERS Sells Off a Big Chunk of its Residential Real Estate Portfolio

The California Public Employees’ Retirement System (“CALPERS”) is restructuring its $226.5 billion holdings by reducing its exposure to residential real estate investments.  It is selling its interests in 28 housing developments or about 20% of its residential real estate portfolio, consisting of 16,300 unbuilt home sites and about 5,000 acres of undeveloped land in 11 states, according to spokesman Brad Pacheco in a recent Bloomberg telephone interview.  CALPERS has agreed to sell the 29 projects to Newland Real Estate Group LLC, the North American affiliate of Japanese homebuilder Sekisui House Ltd. (1928), says Bob McLeod, chief executive officer of San Diego-based Newland.  Sekisui is the lead financial partner and Newland will run the development operations, he said.  Citing unidentified sources, the Wall Street Journal said that the companies were paying between $500 million and $600 million for the 28 projects.  Parties at Newland and CALPERS could not comment on the price due to confidentiality agreements.

The sale to Newland and Sekisui is a prime example of the recent trend by Asian investors seeking development opportunities in the United States because of the potential for growth in the housing industry, as well as a safe haven for investment in a world of economic instability, says John Burns, president of John Burns Real Estate Consulting Inc, in Irvine, California.  Burns says that the value of U.S. land sold for development has fallen more than 70 percent from its peak in 2006, and that this sale “. . is a huge deal for the industry.  It gives the largest developer in the country a new capital partner, which will make it easier to provide more lots to the ‘thirsty’ homebuilders.”

Newland is the developer of six of the 25 largest master planned communities in the United States.  The largest is Cinco Ranch located outside of Houston, Texas, where 862 new homes were sold last year.

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