CalPERS JV buys Las Vegas mall for $1.1bn

The California Public Employees’ Retirement System is betting on Las Vegas.

The US’s largest public pension system bought a 200-store mall on the Las Vegas strip through Institutional Mall Investors (IMI), its partnership with real estate investment manager Miller Capital Advisory, according to an announcement last week.

Data provider Real Capital Analytics (RCA) reported a sale price of $1.1 billion. A spokeswoman for CalPERS declined to comment, and Miller Capital, based in Skokie, Illinois, could not be reached for comment.

CalPERS and Miller Capital bought the shopping center from a joint venture comprising California-based developer Tristar Capital and New York-based real estate investor RFR Holdings. The sellers purchased the mall with another partner, Bahrain money manager Investcorp, in December 2003 for $240.5 million, with plans to put $130 million into improvements, according to RCA. Investcorp sold its stake for an undisclosed price years ago, a spokeswoman said.

Miracle Mile Shops now includes four performance venues, with resident performers Britney Spears and Jennifer Lopez, 13 restaurants and a tattoo parlor, in addition to its retail tenants. The shopping center is one of the 10 busiest malls in the country, according to last week’s statement.

“Las Vegas continues to set record visitor numbers and that is certainly reflected in the traffic we see at Miracle Mile Shops,” said Andrew Miller, Miller Capital’s founder. “The world-class mix of tenants appeals to a broad demographic and we expect to continue to build on the mall's current success.”

Miller Capital and CalPERS formed IMI in 2003, according to the pension’s documents. The partnership, which focuses on regional and super-regional US malls, was worth $4.7 billion as of March 31, according to CalPERS’ most recent investment report. IMI had a three-year net internal rate of return of 21.9 percent at the end of the first quarter. The partnership’s portfolio includes 20.1 million square feet of retail gross leasable area and over 1.1 million square feet of prime office space, according to last week’s announcement.

Before the Las Vegas purchase, the partnership’s most recent publicly-disclosed transaction was the February purchase of a 50 percent stake in Quaker Bridge Mall in Lawrence Township, New Jersey, in a deal that valued the mall at $337.5 million, according to RCA. Deutsche Asset Management owns the other interest.

CalPERS managed $27.3 billion in real estate out of a $303.3 billion portfolio as of the end of the second quarter, according to its most recent investment report. The pension system saw real estate generate a net return of 7.1 percent for the fiscal year that ended June 30, 5.6 percent below its real estate benchmark, the NCREIF-ODCE index.

Miller Capital managed $8.3 billion as of September 30, according to its website.