UNITED STATES - California Public Employees Retirement System has placed Hospitality Properties Trust, first publicly-traded real estate company, on its focus list following underperformance against its peers in terms of share value.
The total stock returns produced so far for CalPERS on this investment have not matched its peer index, as the five-year return for the REIT by the end of February 2009 was -55.9%,widening to -62.4% over three years and -62.5% over one-year. This compares with the REIT Russell Industry GICS Peer Index Returns of -33.1% over five years, -54.8% over three years and -59.7% over one-year.
CalPERS is therefore planning to bring a shareowner resolution against the public REIT at the company's scheduled annual meeting on 15 May and will propose an end to its classified board - where directors serve staggered terms rather than standing for election each year - as CalPERS believes that annual elections for directors provide greater accountability to shareowners.
CalPERS currently holds a total of $7m (€5.3m) in Hospitality Properties stock, purchased through index funds and through its own internal equity funds that are in turn held within its global equity portfolio.
Hospitality Properties is based in Newton, Massachusetts and has $1.07bn in assets under management, to be investment in the ownership and leasing of hotel properties.
CalPERS has been identifying underperforming public stock companies and placing them on a focus list since 1987 in a bid to publicly identify portfolio companies that have resisted its calls for improved corporate governance and stock performance. But this is the first time it has targeted a real estate firm.
The pension fund believes highlighting these companies can help in the long-run as its research suggests companies which go on the focus list and improve their governance practices also increase their share value over time.