New York pension fund bets on real estate rebound

Bloomberg News - (Bloomberg) - Hines and New York state Common Retirement Fund said they will invest more than $1 billion in U.S. office and medical buildings amid a recovery in commercial property prices.

The Houston-based real estate firm and the New York pension, the nation's third-largest plan, formed a joint venture to develop, acquire, own and manage buildings primarily occupied by a single tenant, Hines said today in a statement. The partnership will be funded with $500 million in equity.

Hines and the pension formed a similar venture that developed about 3 million square feet of offices from 1997 to 2004. U.S. commercial property values increased in May for the first time in six months, rising 6.3% from April, according to the Moody's/REAL Commercial Property Price Index.

“The timing is right to reconstitute this venture and strategy,” said Jeff Hines, chief executive of his eponymous firm, in the statement.

The Moody's index, which tracks repeat deals including distressed sales, is down 11% from a year earlier and 46% from the October 2007 peak. Green Street Advisors Inc.'s property-price gauge showed commercial values little changed in June from the previous month and up 20% from a year earlier. Prices are down 10% from their peak, according to the Newport Beach, Calif.-based research company.