Key Departure at CalPERS

Mike McCook charted a new course in real estate investment for the state retirement system. Will his successor continue his strategy?

When Mike McCook became senior investment officer at CalPERS in March 2001, he managed a real estate portfolio of about 40 investment programs. At the time of his departure in late August, the state pension fund had a portfolio of more than 100 programs. In fiscal 2005, the real estate portfolio generated a return of 39 percent.

“Our performance obviously has exceeded every benchmark that we had,” McCook told PERE. “When you do that and there aren't a lot of complaints, from either partners or union sources, then you must be doing your job right.”

McCook was a key player in the management team of CalPERS' chief investment officer Mark Anson, who left the pension fund in January for investment manager Hermes in London. Anson is credited with directing the record-setting financial growth at the nation's largest public pension fund, driving assets from $156 billion in 2001 to $207 billion today. The real estate portfolio played no small part in that growth, recording a 16.3 percent gain for the five years ending September 30, 2005.

years ending September 30, 2005. Despite his success, CalPERS did not select McCook to replace Anson as CIO, selecting instead Russell Read of Deutsche Asset Management.

“I've been here five years, the opportunity to advance my career here is limited, so it's really time for me to go,” McCook said. “It's been a great run.”

McCook said he is looking at different opportunities, but will most likely work “within a fund in one way, shape or form” in the Bay Area.

Before joining CalPERS McCook, 57, oversaw real estate deals for Institutional Housing Partners out of Irvine, a housing partner for CalPERS. He has been working in the industry for 28 years, having started in real estate lending with Home Federal Savings & Loan in San Diego in 1978.

Of all his accomplishments at CalPERS, McCook said one of his proudest has been transforming CalPERS into a global real estate investor in just five years. The pension fund is now invested in over 23 countries including China, India, Brazil and Eastern Europe. He says he appreciates that CalPERS gave him the freedom to implement his strategy.

“A lot of people look at CalPERS and they see the corporate governance, and they say, ‘Boy that's a tough shot,’” he said. “But CalPERS has allowed me more flexibility to grow this program than any person of a comparable position would have anywhere in the world. The board has been extremely supportive of what we've done in real estate.”

Westport hires Martin Landau
Private equity real estate firm Westport Capital Partners has announced that Martin Landau will join the firm's Westport office as a partner focusing on structured debt. Landau, 45, is a 20-year veteran of real estate and was most recently managing director at IXIS, the French investment bank. His prior positions have included managing director at Bear Sterns, director at Deutsche Bank and vice president at Citibank. He is also chairman of the Real Estate Lenders Association. Westport was recently formed by Russel Bernard, a former real estate portfolio manager for Oaktree Capital Management.

Smith joins KPERS
Robert “Vince” Smith has signed on as the new chief investment officer for the Kansas Public Employees Retirement System. Previously, Smith served as the director of international equity investments for the $21 billion Employees Retirement System of Texas. Scott Peppard, who has been the acting CIO for KPERS, has returned to the position of deputy CIO. The Kansas pension fund's investment portfolio includes $12 billion in assets. It currently has a target allocation of 7.5 percent to real estate and 8 percent actually invested in the asset class.

UBS exec leaves to launch firm
James Bray Kelly is leaving his position as executive director and deal manager of the real estate securitization group at UBS to launch an investment firm. The new firm, based in New York, will be called JBK Capital. Kelly intends to initially focus on underperforming markets. In the long-term, the firm will also target distressed assets. The areas of focus will be New York, New Jersey, Connecticut and Florida.

More departures at UBS
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McQuown quits JER to form fund
Gene McQuown has resigned from his position as president of JER Investors in order to launch a $250 million real estate investment fund. The fund will focus on underperforming properties, and will also likely invest in subperforming and non-performing loans. McQuown is said to be talking with a number of capital partners but has not yet made any agreements. McQuown has been with JER and its parent company, J. E. Robert Companies, for 17 years.

Casino talks revived
In yet another showing of private equity interest in the gaming sector, Riviera Holdings Corp., the owner of the aging Riviera casino-hotel on the Las Vegas Strip, announced last month that it will be acquired by a private investment group led by Starwood Capital and Las Vegas real estate developer Brett Torino. At the time of the acquisition, the investors, who are calling themselves Riv Acquisition Holdings, said they would pay about $212 million (€172 million) and assume $215 million in debt, or $17 a share. However, this wasn't the last twist-and-turn in this drawn-out negotiation. In mid April, D. E. Shaw, a major shareholder of the casino operator, said the $17-a-share offer was too low and that it would vote against the deal.

Walton Street to sell Chicago office
David Werner, a New York real estate entrepreneur who often flips his contracts to other buyers, has emerged as the wining bidder for the 1.3 million square foot office building at 311 South Wacker Drive in Chicago with an offer of $286 million (€232 million). The building is owned by Walton Street Capital, which acquired the property in October 2002 for $273 million. Walton transferred a 50 percent stake in the company to its fourth fund in May 2003.

Blackstone unloads San Francisco hotel
Blackstone Real Estate Advisors has sold the Westin St. Francis in San Francisco's Union Square to Strategic Hotels & Resorts for $440 million (€357 million). The sale price for the 1,195-room hotel represented a per room price of $368,200. Blackstone originally bought the hotel in 2000 for $243 million. The Westin St. Francis was developed in 1904 and is in the middle of a six-year, $185 million restoration.

Rockpoint partners with MSD
Private equity real estate fund operator Rockpoint Group said it will enter into a 50-50 partnership with Michael Dell's MSD Capital in the purchase of the Four Seasons Resort Hualalai and adjacent land on the Big Island of Hawaii. The 243-room luxury hotel includes an 18-hole Jack Nicklaus Signature Golf Course. The Rockpoint team plans to build several high-end residential condominiums on the neighboring 250-acre parcel. The transaction also included a minority interest in a 2,000-acre plot of land, but plans for this land have not yet been determined.

Pyramid acquires Boston-area hotel
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