New-York News

City pension plan invests $60M in affordable housing fund

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One of the city’s largest pension funds has invested $60 million in rent-regulated housing loans along with the nonprofit Community Preservation Corp. and real estate giant Related Cos., a move that officials said will help keep 35,000 units affordable.

“Having the pension fund as our partner is a real benefit because they invest for the very long-term,” said CPC Chief Executive Rafael Cestero. “Some of this housing is distressed and needs work.”

The cash from the New York City Employees Retirement System represents 25% of an investment fund created last year by CPC and Related Fund Management. Those two parties in December acquired a 5% stake in loans for 1,140 mostly rent-regulated buildings from the failed Signature Bank, with the federal government retaining the rest.

CPC and Related’s decision to accept NYCERS’ money was celebrated Tuesday morning by city officials who described it as an important step in their efforts to preserve affordable housing.

“The $60 million investment is a real, real indicator of how we can save real units,” Mayor Eric Adams said at a press conference, adding the money would help preserve 3% of the city’s rent-regulated apartments.

Comptroller Brad Lander described the deal as “a shining example of creative and prudent” investing. Related’s executive vice president for policy, Charles O’Byrne, praised Lander for steering pension money in a manner that is “both prudent and progressive.”

“It’s really a remarkable day for the city and one that we’d like to believe represents a turn of the corner to more and creative investments,” O’Byrne said.

The $60 million infusion lifts the size of NYCERS’s rental-apartment portfolio to about $700 million, or less than 1% of its total $86 billion portfolio. But it’s a move forward considering the city has had difficulty investing directly in the affordable-housing market, because landlords typically aren’t enthusiastic about taking on the city as a partner. Last year’s failure of Signature Bank opened a window of opportunity, because the FDIC took custody of the bank’s real estate loans and then began selling them off.  

Lander said the investment will generate an approximately 12% internal rate of return for NYCERS. Internal rate of return is a metric widely used in private-equity and pension-investing that overstates actual investment performance by excluding expenses such as maintenance and staff.

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Aaron Elstein , 2024-05-21 21:14:06

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