(Source: The Sacramento Bee)
By Dale Kasler, The Sacramento Bee, Calif.
Oct. 23--CalPERS' already shaky $500 million investment in a New York
housing complex suffered a setback Thursday when a court ruled the complex
illegally raised rents.
The New York Court of Appeals, the state's highest court, ruled that the
increases violated the city's strict rent-control laws.
A group of tenants had sued the landlords for $215 million.
The California Public Employees' Retirement System is among the major
investors in Manhattan's sprawling Stuyvesant Town and Peter Cooper Village
apartment complex, pouring $500 million into a deal to buy the project in 2006
for $5.4 billion.
The partnership is dangerously low on cash and might soon go into
default, the Wall Street Journal reported last week.
That would likely wipe out the investments of CalPERS and others. The
state's other big public pension fund, the California State Teachers'
Retirement System, already wrote off its $100 million investment.
CalPERS won't say whether it's written off any of its investment.
The idea was to convert many of the rent-controlled units into
market-rate apartments. But the plan ran into a weakening real estate market
and legal opposition from tenants' groups. Stuyvesant Town and Peter Cooper
Village, built in the 1940s, have served as a middle class haven in pricey
Manhattan.
The court ruled that the complex's original owner, MetLife, and the
current ownership group overcharged nearly 3,000 tenants by raising their
rents illegally. The owners had argued that the units were no longer subject
to rent-control laws.
The CalPERS and CalSTRS real estate portfolios have absorbed substantial
losses lately. In the most recent fiscal year, CalPERS' holdings lost 35
percent of their value. CalSTRS' holdings fell 43 percent.
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