In Practice April 10, 2008

Bill Would Open CalPERS to Private Sector Workers

Californians who don’t have access to a retirement savings plan at work could be able to set up a 401(k)-style account through the state of California under a new proposal.
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The bill, authored by Assemblyman Kevin de Leon, D-Los Angeles, is aimed at the 6 million employees in California who aren’t offered a pension or retirement savings plan at work, according to the San Jose Mercury News. The plan has been backed by Republican Governor Arnold Schwarzenegger.
The proposal, Assembly Bill 2940, passed its first test Wednesday when a committee that deals with retirement issues approved it on a 4-1 vote. The bill would make California the first state in the nation to open its public retirement plan to workers in the private sector, supporters said, although several other states are considering the idea. The program would allow employees at businesses without pension or defined contribution retirement plans to set up IRA-type savings accounts through the California Public Employees’ Retirement System (CalPERS).
Participating workers would have pretax earnings deducted from their paychecks and deposited into the savings accounts, and employers could choose to match those contributions. Workers would be able to carry the accounts from job to job.
Administration
Proponents said the plan would be administered with money raised from fees on participants, so no new taxpayer money would be needed – and the fees would be lower than those workers might be charged by a private investment firm, de Leon said, according to the news report. However, Assemblyman Kevin Jeffries, R-Lake Elsinore, who voted against the proposal, questioned whether government would muscle out private investment firms that offer retirement savings plans such as IRAs and 401(k)s, according to the Sacramento Bee. “Is there going to be a competitive disadvantage created by bringing the state into this arena?” he said.
It is an argument that opponents of similar measures in Connecticut have recently raised (see CT Lawmakers Propose Retirement Plan Option for Small Businesses). The state of Washington is moving ahead with a plan to offer retirement savings accounts through its public employee retirement system. Washington lawmakers are expected to consider the proposal in 2009.
Regarding the California proposal, Schwarzenegger said it “will help make businesses more competitive, without costing them anything, and will help employees save for their retirement, without costing taxpayers anything, either.”
Products April 10, 2008

TIAA-CREF Launches New Real Estate Fund

TIAA-CREF Asset Management has announced the launch of TIAA-CREF U.S. Real Estate Fund I, L.P.
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The fund is a closed-end fund that will invest in a diversified portfolio of primarily high-quality core real estate assets in the office, retail, industrial and multifamily sectors. It offers primarily high net worth investors represented by registered investment advisors access to the institutional real estate experience of TIAA-CREF, and the company’s sixty years of experience with that asset class, according to a press release.
The offering of the Fund’s limited partnership interests has been registered with the SEC and state securities administrators.
“We look forward to working with financial advisors offering suitable investors, with a long-term investment horizon, the opportunity to invest in direct ownership of real estate properties through TIAA-CREF,’ said Shawn Paulk, head of TIAA-CREF Asset Management’s Advisor Services group. “This opportunity was formerly only available to institutions and eligible TIAA-CREF plan participants.’ TIAA-CREF U.S. Real Estate Fund I, L.P. is directed at investors with a net worth (as defined in the prospectus) of at least $3 million, who wish to diversify their personal portfolio and participate in the direct ownership of real estate properties.
The fund has an initial minimum investment requirement of $150,000. A subsidiary that will elect to be taxed as a real estate investment trust (REIT) is expected to make substantially all real estate asset transactions. The term of the fund is seven years after the end of the offering period, which the general partner may extend to a maximum of 10 years. For this reason, participation is suitable only for investors with a long-term outlook.
“At least 80% of our investments are expected to be in high-quality core properties in the 50 largest U.S. markets,’ said Suman Gera, managing director of TIAA-CREF Global Real Estate and the portfolio manager for the Fund. Ms. Gera continued, “We intend to use a top-down and bottom-up research approach to select commercial properties, primarily in the office, retail, industrial and multifamily sectors, which are expected to provide a stable, predictable income stream, have high occupancy levels, credit-worthy, financially sound and reputable tenants, and a low or modest level of projected near-term tenant turnover.’
The remainder of the Fund’s assets will be invested in value-add assets, which include properties that feature generally higher vacancy rates, present more varied leasing opportunities and near-term lease expiration exposure and may require capital infusions to enhance the leasing profile of such properties.
With very limited exceptions, each investor wishing to purchase units must be represented by a registered investment advisor or a chartered trust company. TIAA-CREF charges no performance fee or sales charge at the fund level, according to a press release.

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