Expect more hits to pension plans and state government agencies as investments go under. The unfortunate thing for them is that they will not be able to go to the Fed for a 'mulligan' like the investment banks. The state agencies will try to go to the taxpayers and property owners in their states, however.
What sense does it make for state pension funds to invest in high risk ventures if the losses are not realized by their 'shareholders,' the state employees? This is why we favor no bailouts of pension funds who get caught up in bad investments.
This underscores why the Fed bailout of Bear Stearns and JPM was the worst policy decision in a generation.
CALPERS-Funded Land Partnership Goes Bankrupt
June 9, 2008
LOS ANGELES (AP) ― A 15,000-acre California real estate partnership that has the nation's largest public employees pension fund as a big investor has filed for Chapter 11 bankruptcy protection.
LandSource Communities Development LLC's assets include 15,000 acres of undeveloped land north of Los Angeles in the Santa Clarita Valley, among the largest land deals to falter amid the national housing glut.
The California Public Employees' Retirement System, an investor in the partnership that provides pension, health care and other retirement services for about 1.5 million public employees, did not immediately return calls Monday.
LandSource issued a news release late Sunday to announce the bankruptcy filing in U.S. Bankruptcy Court in Delaware.
LandSource had been trying for months to restructure a $1.24 billion debt, the company said. It received a default notice on April 22 after missing a payment when a decline in the assessed value of that Southern California land holding triggered an additional charge.
"LandSource believes chapter 11 provides the most effective means for the partnership to preserve the values of its business...while it works with creditors to achieve a long-term restructuring," spokeswoman Tamara Taylor said in the release.
Attempts to reach Taylor and LandSource before business hours were unsuccessful.
LandSource operates in California, Arizona, Florida, New Jersey, Nevada and Texas. The partnership announced it has received a $135 million line of credit from a group of lenders led by Barclays Bank, allowing it to fund operations during the Chapter 11 period.
CalPERS, with $254.8 billion in assets, is involved in LandSource through its participation in MW Housing Partners, an investment fund managed by MacFarlane Partners LLC.
MW Housing Partners acquired 68 percent of the Santa Clarita property from home builder Lennar Corp. and LNR Property Corp., a unit of Cerberus Capital Management
