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Shopping Centers Today -> November 2007
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CALPERS BROADENS ITS HORIZONS
The California Public Employees’ Retirement System (CalPERS) is loosening up a little when it comes to investing in emerging markets, enabling its representatives to place funds in previously off-limits nations such as China, Colombia, Egypt, Pakistan and Russia. The pension fund, which controls $240 billion, has avoided those markets since 2002 because it considered them too risky. CalPERS, which has earmarked about $5.8 billion for emerging markets, will now allow its fund managers to choose markets for investment based on such factors as political stability and transparency rather than simply sticking to a preapproved list determined annually by CalPERS researchers.
Teams are top players in open-air sector
Joint ventures have become the primary purchasing vehicles for open-air centers in the U.S., speakers said at ICSC’s Research Conference in Toronto. An estimated $30 billion worth of U.S. open-air centers are owned by joint ventures, and that number is expected to keep rising as a variety of partnerships gain popularity, said Greg Andrews, CFO of development firm Equity One. The prototype for the current wave of joint ventures involves the marriage of institutional capital and operational expertise, he said.
“At leading REITs such as Kimco, DDR and Regency, institutional partners actually own 40 percent of the assets controlled by these companies,” Andrews said. “Ten years ago it was much less.” The trend has contributed to the skyrocketing price of retail real estate in recent years: The national average price for retail property is $189 this year, up 38 percent from the 2004 average, Andrews said. But the current U.S. credit crunch will likely slow the trend temporarily, as institutional investors refrain from doing deals until the gap between bids and asking prices shrinks, Andrews said. “Institutions don’t want to put a price on these properties for fear of being wrong,” he said. Once a company takes that step and a market clearing price is established, the pace of joint venture deals will return to recent volumes.
data debut
Moody’s Investors Service is launching the first series of commercial property price indexes that will track same-property price changes based on completed transactions. “This method avoids the lags and distortions that can occur with other commercial property value measurements using appraisals or average prices, says Sally Gordon, a Moody’s senior vice president. The indexes will include one monthly national aggregate index for all property types, 12 quarterly indexes covering retail properties nationally and 12 for the Western U.S., an aggregate of the 10 largest metropolitan statistical areas, and 16 annual indexes covering retail properties in the Eastern U.S., the South, and Southern California, and some sectors in other selected markets. The tools are based on data for all U.S. commercial property sales transactions over $2.5 million, as compiled by Real Capital Analytics, a research firm. Another firm, called Real Estate Analytics, will develop and trade derivatives based on the indexes.
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