By Dale Kasler
dkasler@sacbee.com
Published: Thursday, Feb. 11, 2010 – 12:00 am | Page 8B

Another high-profile CalPERS real estate investment is on the verge of going bust.

Massachusetts officials this week issued a default notice against a Cal-PERS partnership that’s been struggling for years to build an $800 million residential-commercial complex in Boston. A default would likely mean the end of the project as far as CalPERS is concerned.

The size of the potential loss isn’t known. Clark McKinley, a spokesman for the California Public Employees’ Retirement System, said the deal was part of a pool of urban real estate investments, and CalPERS wouldn’t specify the amount sunk into the Boston project.

The urban real estate pool lost 92 percent of its value – or more than $1 billion – in the 12 months ending Sept. 30, according to a CalPERS staff report.

McKinley said CalPERS is “evaluating developments” in Boston but had no further comment.

Columbus Center was envisioned as a six-building condominium-hotel complex built on a deck over the Massachusetts Turnpike through the heart of Boston. CalPERS invested in the deal with its longtime real estate manager MacFarlane Partners of San Francisco and a Boston developer named WinnCompanies.

MacFarlane resigned last October as a CalPERS manager. The MacFarlane firm steered CalPERS into one of its biggest real estate losses ever, a project called LandSource Communities. LandSource went bankrupt in 2008 and CalPERS lost its entire $900 million-plus investment.

CalPERS has suffered other big losses in real estate in the past couple of years, including $500 million on a New York apartment complex that just defaulted on its mortgage.

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