CalPERS invests $190m in Brazil with Hines

The California Public Employees’ Retirement System has committed $190 million to Hines as the public pension again targets Brazilian real estate.

The $207 billion public pension said this was the third time it had invested in a separate account focused on Brazil with Hines, having committed $95 million to the Hines CalPERS Brazil Fund I in August 2005 and $285 million to the follow-on fund in 2007.

Those investments are currently valued at $142.4 million and $147 million, respectively, CalPERS’ chief investment officer Joe Dear said.

Dear added that Brazil’s “fast-growing … real estate market” was driving demand for commercial and residential real estate and proving an attractive investment opportunity for the likes of the California pension fund.

“Interest rates have been favourable, and increased earnings in Brazil have spurred the development of shopping centers, warehouses, offices and residential housing,” he continued.

CalPERS reported a -5.1 percent return in the three months to the end of June but a -37.1 return over the past year. Its real estate portfolio is now valued at $14.9 billion, compared to $17.8 billion in the year to the end of June, 2009 – a 16 percent loss over the past 12 months.

As a result of its recent poor performance, CalPERS has turned its attention increasingly to core investments and separate accounts. In July, Dear said the pension’s real estate team had “completely restructure[ed] 24 separate accounts”, with a move back to core investing and away from value-added and opportunistic real estate.

“We’re moving back into core properties and accepting managers in whom we have confidence. We’re letting go underperforming managers and looking for the best possible deals as they become available in a still sluggish market,” Dear explained at the time.

In June 2007, Hines and CalPERS acquired the 409,000-square-foot BankBoston office building in São Paulo for BRL 285 million (€124.1 million; $166.3 million). According to data provider Real Capital Analytics, the 29-storey property was sold with a 9.5 percent cap rate by Bank Itau, which itself acquired the office building in 2006 from Bank of America.

That same month, the JV also acquired the 693,000-square-foot industrial warehouse, Cargo Center Dutra II, in Rio de Janeiro for BRL 204.6 million. At the time of the acquisition it was 97 percent leased.