Pension Fund Branches Out With Ventures in Real Estate

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Pension Fund Branches Out With Ventures in Real Estate

By Joseph P. Fried, The New York Times

October 19, 2003

The largest pension fund for New York City employees has decided to invest in commercial real estate for the first time, committing up to $100 million to it.

Comptroller William C. Thompson Jr., the investment adviser to the fund, the New York City Employees Retirement System, said on Friday that its action was a "prudent investment" for its members "and one that supports the growth and redevelopment of our city's economy."

The stock market's fall over the last three years has combined with mandated pension benefit increases to reduce the system's assets to $31.2 billion from $44.4 billion in 2000. The assets of all city pension funds have fallen to $74 billion from $105 billion in that period, said a spokesman for Mr. Thompson, Scott Taffet.

The Employees Retirement System provides pensions to 130,000 retirees, while 200,000 current employees contribute to it. Its $31.2 billion in assets is largely invested in stocks and bonds, though it has also invested in residential real estate, Mr. Taffet said. He cited a project involving the rehabilitation of four apartment buildings in Harlem.

The system covers city employees except police officers, firefighters, teachers and other school employees, with each group having its own fund. The other funds are not part of the commercial real estate investment program, Mr. Taffet said.

The pension money earmarked for the program will be used in ventures to "develop, redevelop and acquire premium commercial property throughout the five boroughs," Mr. Thompson said. During the next three to five years, the money will be turned over to a realty investment group, Tishman Speyer/Travelers NYC Real Estate Venture V, L.P., and the group will invest it for the pension fund. No projects have been designated yet, Mr. Taffet said.

Though the other pension funds are not participating in the commercial realty program, all but one, the fund for non-teacher school system employees, have also decided to diversify their assets more, Mr. Thompson said.