The Journal has a good story looking at the troubles at Calpers, the California state-pension system that’s one of the biggest investors in the world. It was also one of the biggest real estate investors in the world, particularly of undeveloped land, which has plunged in value. Now it may have to start hitting up governments in the state for more contributions—at a time when those municipalities are already slashing jobs.

Undeveloped land is a particularly risky investment, because unlike properties like malls or apartment complexes, it brings in no rental income. When real estate markets turn, investors who have bought land planning to build on it or flip it often get into trouble because land is hard to sell than other investments like stocks or bonds. For instance:

In recent years Calpers invested in:

Three large parcels near Phoenix, one of the nation’s hardest-hit property markets. Last month, Calpers effectively walked away from one of the three, after having invested $140 million. On one of the others, to start earning a return, Calpers’s investment partner recently started selling ground water from the property.

I’m pretty sure that selling water isn’t going to bring much of a return.

And this is, um, bad:

Calpers in recent weeks said it expects to report paper losses of 103% on its housing investments in the fiscal year ended June 30. That’s because Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed.

The Journal illustrates that with a Calpers purchase of:

A massive block of land with room for about 8,000 units near the small town of Mountain House, Calif., the nation’s most “underwater” housing market by one measure. (Nearly 90% of homeowners there owe more on their mortgages than their homes are worth, according to mortgage-research firm FirstAmerican Corelogic.) As of June 30, Calpers valued the investment at negative $305 million, reflecting the fact that it has repaid borrowed money used in the deal.

That’s an interesting and seemingly better way of accounting for potential losses. Saying your asset is worth negative $305 million clearly shows the downside of leverage. Why is a government pension plan allowed to make such risky bets and why is it allowed to lever them up with huge amounts of debt?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.