SB County retirement fund rolling with punches

     When news hit the airwaves on Monday that California developer LandSource Communities Development LLC filed for bankruptcy, eyebrows were raised in San Bernardino County.

     That’s because LandSource — which owns 15,000 acres of land north of Los Angeles — was backed by millions of investment dollars from CalPERS, the largest U.S. pension fund.

     Luckily, not a penny of the $6.3 billion administered by San Bernardino County Employees’ Retirement Association is invested in the CalPERS portfolio.

     But like other pension pools, the county’s retirement fund is taking a licking from the global economy right now.

     The fund’s investment return was 1.5 percent — about $90 million — by the end of May, with one month to go in its fiscal year.

     Compare that to a 20-percent return — about $1.26 billion — during the 2006 – 07 fiscal year.

     “It’s been very rough across the board for any investment,” said Tim Barrett, executive director and chief investment officer of the association. “The credit crunch has hurt everything across the board.”

     Most of the county’s 19,000 employees are planning to retire on their portion of the fund.

     “We own real estate, but we don’t own large blocks of raw land,” Barrett said. “We own apartments, industrial warehouses, office buildings and retail real estate all around the world, but primarily in the U.S.”

     Drastic events take drastic measures. Barrett said he’s been pulling money from volatile stock market investments and rolling it into bonds, credit, distressed debt, private equity and real estate over the last seven years.

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To see the June 10 Los Angeles Times article about LandSource Communities LLC and CalPERS, look below:

CalPERS-backed LandSource files for Chapter 11

From Staff and Wire Reports
Los Angeles Times
June 10, 2008

A California real estate partnership that the California Public Employees’ Retirement System poured about $1 billion into has filed for Chapter 11 bankruptcy protection.

LandSource Communities Development’s assets include 15,000 acres of undeveloped land in the Santa Clarita Valley, among the largest land deals to falter amid the national housing glut. The land was appraised at $2.6 billion at the time of the CalPERS investment, but has dropped considerably in value since then.

CalPERS, the nation’s biggest pension fund, provides pension, healthcare and other retirement services for about 1.5 million public employees. CalPERS did not immediately return calls Monday. Last month, its president, Rob Feckner, told the Los Angeles Times he hoped to forestall a bankruptcy filing but stressed that “if we incur any losses, they will be minor” because the pension fund is “very well diversified, in good shape.”

LandSource issued a news release late Sunday to announce its filing in U.S. Bankruptcy Court in Delaware.

Santa Clarita-based LandSource had been trying for months to restructure a $1.24-billion debt, the company said. It received a default notice on April 22 after missing a payment when a decline in the assessed value of that northern Los Angeles County land holding triggered an additional charge.

“LandSource believes Chapter 11 provides the most effective means for the partnership to preserve the values of its business . . . while it works with creditors to achieve a long-term restructuring,” spokeswoman Tamara Taylor said in the release.

Attempts to reach Taylor and LandSource were unsuccessful.

LandSource operates in California, Arizona, Florida, New Jersey, Nevada and Texas.

The partnership announced that it had received a $135-million line of credit from a group of lenders led by Barclays Bank, allowing it to fund operations during the Chapter 11 period.

CalPERS, with $254.8 billion in assets, is involved in LandSource through its participation in MW Housing Partners, an investment fund managed by MacFarlane Partners.

MW Housing Partners acquired 68% of the Santa Clarita property, along the Interstate 5 corridor 30 miles north of Los Angeles, from home builder Lennar Corp. and LNR Property Corp., a unit of Cerberus Capital Management.

Lennar and LNR each maintained a 16% interest in LandSource.

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