By Andrew Khouri and Ben Poston | LA Times
At the Shady Lane Apartments in the suburbs east of San Diego the carpet could be worn, the appliances old. But with some of the cheaper rents around, the complex was a relatively affordable home for an increasingly priced-out working class.
Then, in 2021, the nonprofit that owned the 112-unit property sold it. In just under three years, the new owners raised rent for vacant units 21 percentage points more than landlords in nearby neighborhoods, according to data from a real estate research firm. On average, available homes at the complex went from less expensive than the surrounding area to more expensive.
Existing tenants saw change too. Rubin Flournoy, a supervisor at a city water treatment plant, said he’s seen his rent climb roughly twice as much annually since the sale. What he didn’t know was that the new owners had a surprising funding source: people like himself.
The El Cajon complex had been sold, according to research firm CoStar and commercial loan reports, to a giant real estate investment fund managed by the private equity firm Blackstone. Investors in the fund include the California State Teachers’ Retirement System and other public pension systems across the country.
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“I didn’t know that [public pensions] did these types of investments,” said Flournoy, a member of the San Diego City Employees’ Retirement System. “I mean, I am being affected because somebody else’s pension is doing it. So I’m quite sure that my pension is doing the same thing to somebody else.”
Across the country, public pension systems are pouring billions of dollars into higher risk real estate investment funds that are managed by private companies and target outsize returns. Investment experts say the trend is driven by a variety of factors, including a long-running goal of portfolio diversification and a more pressing need by underfunded public pension systems to boost returns to pay members what they’ve promised.
Read more at: LA Times
