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Ohio PERS Invests $75 Million In Shopping Centers

The Ohio Public Employees Retirement System (PERS) is giving $75 million to FCA Partners to invest in retail real estate – specifically, large shopping centers and grocery stores.

From IPE Real Estate:

The new allocation will be invested over the remainder of this year and the beginning of next year.

Capital will be invested in a mixture of grocery-anchored shopping centres and power shopping centres across the US, with a value-add approach.

As a separate-account structure, FCA will have investment discretion within agreed investment guidelines, giving the manager the authority to make final investment decisions without approval from Ohio PERS.

The manager will invest in both debt and equity investments.

Although the relationship between Ohio PERS and FCA Partners is a new one, the manager is a spin-off of Faison & Associates, in which the fund first invested in 1995.

Since inception, the pension fund has invested $932m with the manager.

The death of Henry Faison in 2012 saw the creation of FCA Partners; Ohio PERS has therefore transferred the separate account previously managed by Faison to FCA.

The pension fund is looking to place more capital with separate account managers in value-add retail, industrial and hotel property as part of its $1.26bn allocations to separate-account managers this year.

Ohio PERS manages $88.6 billion in assets, of which 10.3 percent is allocated towards real estate.

Ohio PERS Director Leaves For Ohio State CIO Job

Ohio PERS has announced that its director of investments, John C. Lane, will be leaving his post to become the chief investment officer at Ohio State University. From the Columbus Dispatch:

John C. Lane is to start work as Ohio State’s vice president and chief investment officer on Oct. 29 after the university’s board of trustees confirms the appointment, according to an OSU news release this afternoon. He has managed investments for the public employees pension system since 2010 and previously managed investments for Eastman Kodak and for the Pennsylvania Public School Employees’ Retirement System.

At Ohio State, Lane replaces Jonathan Hook, who left this spring to take a job managing investments for a nonprofit foundation. Hook was paid $627,300 per year. Ohio State did not immediately disclose what it intends to pay Lane.

“John Lane has demonstrated excellent results throughout his career and I am confident he will lead us to a new level of performance,” Geoff Chatas, OSU’s senior vice president and chief financial officer, said in the news release. “He possesses the expertise to assure that the university succeeds in its responsibility to the public and our supporters to maximize investment returns.”

Lane will report to Chatas in his new role.

Lane will be managing $3.4 billion of assets for the University.

Ohio Auditor: New Pension Accounting Rules Could “Distort” State’s Financial Condition

Ohio’s top auditor, Dave Yost, publicly stated earlier this month that new GASB accounting rules – ones that change the way pension liabilities are reported – would hurt Ohio and its local governments.

In an op-ed on the Heartland Institute website, he explains why. From the piece:

Ohio is one of six states treating pensions as a “simple property right.” By Ohio statute, the amount a public employer must contribute to its pension obligation is capped. If a portion of the pension liabilities of the state’s five systems continues to be unfunded, the impact could be shouldered by a combination of the local government, individual employees, reforms from current contributors, or capital shifts from non-mandated benefits (such as health insurance).

The concern in Ohio is that the GASB 68 requirement for local governments to report this liability could dramatically distort the financial condition of a local government. It is important to keep in mind that this new standard creates an accounting liability, rather than a legal liability.

In Ohio, there are no legal means to enforce the unfunded liability of the pension system as against the public employer.

Upon receiving this new standard and recognizing the challenges that GASB 68 poses, my office got to work to determine how Ohio’s local governments can accurately report their financial positions while also following accounting standards.

To comply with GASB 68, our office suggests Ohio governments report the proportionate share of the unfunded pension liability, as a separate line item on the entity’s Statement of Net Position, with the detail of multiple pension systems’ participation in the footnotes, as necessary.

Governments should also include language in their Management Discussion & Analysis (MD&A), explaining Ohio’s legal environment and the limitations on enforcement of the unfunded pension liability as against the local government.

Yost also claims that ratings agencies, including Moody’s and Fitch, could downgrade the state’s bond ratings due to the new way liabilities are reported. But the downgrades wouldn’t be fair, Yost argues, because the financial health of the state is the same even if the numbers look different.

Yost testified earlier this month in front of the GASB regarding the negative impact the rules could have on the state.

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