CalSTRS Buys $470 Million New York City Office Building


As part of a joint venture with MHP Real Estate Service, CalSTRS has bought a 1.2 million square foot office property at 180 Maiden Lane in downtown New York City.

The building is the former home of Goldman Sachs’ offices.

From Investments and Pensions Europe:

The US pension fund has invested $260m in the asset – around 55% of the deal – through a joint venture with New York City-based MHP Real Estate Service.

The deal was carried out via CalSTRS’s separate account real estate manager Clarion Partners.

The property is currently 66% vacant, with around 800,000sqft left empty by the departure of Goldman Sachs.

CalSTRS said it had a full-scale capital and leasing plan for the next five years that would result in an increase in capitalisation for the property.

The pension fund classified the 1.2m sqft asset, at 180 Maiden Lane, as value-added.

Gary Rufrano, director and a member of the acquisitions group at Clarion, said there would be “many tenants who will be looking for space” in the area.

“Rental rates in the sub-market are 25-35% less than in Manhattan,” he said.

“There also is the fact that, in the down-town area, new amenities like shops, restaurants and housing options have been added to the sub-market over the past couple of years.”

MHP, which will oversee the day-to-day operations of the property, will carry out a $28m refurbishment of the property’s lobby and amenities.

The redevelopment includes the addition of a cafeteria and fitness centre for tenants.

CalSTRS manages $190 billion in assets.


Photo by Sarath Kuchi via Flickr CC License

Few Details On New York Pension’s Partnership With Goldman Sachs As Comptroller Remains Quiet

Manhattan, New York

New York State Comptroller Thomas DiNapoli, the sole trustee of the states $181 billion Common Retirement Fund (CRF), announced last month a partnership between the pension fund and Goldman Sachs.

CRF will give Goldman $2 billion to invest in global equities. But few other details have emerged about the partnership. That led one think tank, the Pioneer Institute, to push for more clarity. But the Comptroller’s office has remained mum on specifics. From Public Sector Inc:

The lack of transparency in portfolio management and the conspicuous absence of a board of trustees overseeing the investment process is troubling, if not perilous.

Matthew Sweeney, a spokesman for the comptroller’s office, answered some of a dozen questions about the GSAM deal. Here are a few of those he did not comment on, completely unedited:

– Which other investment management firms applied to the competitive bidding for the $2 billion allocation?

– What were the specific criteria on the basis of which GSAM was selected?

– Can you share the investment policy sheet that was publicized as part of the RfP for this portfolio segment? This would include targets like concentration risk and counterparty risk limits as well as a number of other parameters related to the asset classes included, long/short ratios, other risk metrics, geographies and other relevant characteristics of the desired portfolio.

– What are the performance targets in terms of risk and return for the performance-based compensation, if any?

– What are the benchmarks selected to evaluate the performance of this portfolio sleeve in the coming years?

Mr Sweeney did answer a question regarding the compensation structure in the contract – with the laconic: “Fees are disclosed on an annual basis.”


With so much pension money at stake, why didn’t Mr DiNapoli’s office publicize the selection process, a clear rationale for the investment and the performance objectives he has (or so one hopes) for Goldman? What value are Goldman’s undoubtedly well-compensated analysts and investment bankers supposed to add?

The so-called partnership “will initially focus on dynamic manager selection opportunities in global equities to enhance returns” and then provide “improved analytics and reporting on its portfolio and enhanced evaluation and due diligence on current and potential active managers.” In other words, the CRF added a potentially expensive actively managed distraction for its global investment team days before CalPERS announced ditching its $4 billion hedge-fund allocation precisely because it was too small to make a dent in overall return and too expensive in terms of time and money to manage.

The bottom line is that, because of their sheer size, most pension funds can do little but focus on efficient cost and risk management. An open and competitive bidding process is essential to keeping costs down. And a critical part of risk management is having a robust, transparent and accountable ­investment process, which the CRF appears to be patently lacking. One need not look far afield to see where this sort of conduct ultimately leads.

The Common Retirement Fund paid $575 million in management fees in fiscal year 2013-14. The fund manages $181 million in assets.

You can read more coverage of the Goldman Sachs deal here and here.

Delving Deeper Into New York Fund’s Partnership With Goldman Sachs

Manhattan, New York

New York State Comptroller Thomas P. DiNapoli announced yesterday that New York’s Common Retirement Fund (CRF) plans to give $2 billion to Goldman Sachs for investing in global stocks.

The partnership is the first of its kind of the CRF. Aaron Elstein, who runs the In The Markets blog, weighed in on the partnership in a column on Wednesday:

“This innovative partnership gives the New York State Common Retirement Fund full access to world-class global equity investment opportunities and the nimbleness to take advantage of them on a timely basis,” DiNapoli said.

The innovative thing is that the pension fund hasn’t hired Goldman before. As for “access to world-class global equity investment opportunities,” it seems worth noting that mutual funds bearing the Goldman Sachs name have collectively returned 12.43% over the past five years, according to Morningstar, which is average for their category. In 2010 and 2011 the funds underperformed their category and in 2012 and 2013 outperformed. This year, their total return of 4.7% is exactly in line with the category. Maybe the global equity investment opportunities from Goldman aren’t really the ones to which you’d want special access. (A spokesman for the comptroller’s office later said Goldman can’t pitch in-house funds to the pension fund.)

Certainly the New York state pension fund will be offered investments that Goldman doesn’t make available to mutual fund customers. We know that because the press release said the pension fund and Goldman “will initially focus on dynamic manager selection opportunities in global equities to enhance returns in the Fund’s equity portfolio.” That doesn’t sound like such a bargain, either.

“Dynamic manager selection opportunities” is gibberish that in its tortured way means Goldman will introduce the pension fund to money managers who aim to outperform the market.

Elstein goes on to dissect the rest of yesterday’s press release from DiNapoli and also touches on the drawbacks of actively managing investments. Read the whole column here.