BlackRock out as CalPERS consolidates multifamily

The California giant has united its $1.1bn multifamily portfolio under GID, at the expense of BlackRock, which turned in a negative 12.3% return on its portfolio over five years.

The $212 billion California Public Employees Retirement System today announced the consolidation of its entire core multifamily portfolio under a single manager – GID Investment Advisers, an affiliate of The General Investment & Development Companies – leaving former partner BlackRock Realty Advisors out in the cold. The consolidated portfolio consists of 57 apartment complexes in 13 states with a value of roughly $1.1 billion.

Performance statistics obtained by PERE show a notable difference between GID and BlackRock over the medium term. BlackRock underperformed GID on a one-, three- and five-year basis during a performance review conducted at the end of March. BlackRock logged returns of -36.1 percent, -31.3 percent and -12.3 percent over those periods, while GID saw returns of -34.1 percent, -20.3 percent and 0.4 percent, respectively.  A CalPERS spokesman said the main criterion for its managers is performance, adding that “the numbers speak for themselves”.

GID will see its assets under management grow significantly as a result of this decision. The firm, which previously only managed roughly $75 million on behalf of CalPERS, will now assume control of BlackRock’s $1 billion-plus assignment and co-invest in it alongside CalPERS.

GID, through its Windsor Realty Fund III, and BlackRock, through the Western Multifamily LLC, had jointly managed CalPERS’ multifamily portfolio since 1998. BlackRock and GID did not return calls by press time.

In a press release, CalPERS’ senior investment officer for real estate, Ted Eliopoulos, said GID has been a great partner and manager during a difficult market and will enter into an alignment of interest by making a significant co-investment in the new venture. “By consolidating our core multifamily portfolio under a single partner/manager, we anticipate lower costs, improved efficiency and enhanced performance as we reposition our real estate program for long-term growth,” he added.

A restructuring of CalPERS’ real estate portfolio has been underway since Eliopoulos took over the program in January 2007. Like many investors, the pension giant lost market value in the financial crisis and has been undertaking an overhaul of its asset classes, the spokesman said. Hat has involved working with its 24 major partners and their funds, revaluing all the properties in those funds and taking appropriate action, including ending some partnerships and shifting portfolios to other managers, he explained.