New York City Pension Wants In On Lawsuit Against Real Estate Firm Accused of Inflating Prices


The New York City retirement system is attempting to join a lawsuit already being brought by two pension funds against a real estate firm that allegedly inflated its performance figures.

The two pension funds already heading the case, State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS), are claiming millions in losses.


American Realty Capital Properties (ACRP), a real estate investment trust provider, is facing a growing group of investors claiming it fraudulently inflated performance figures.

The $159 billion New York City retirement system and TIAA-CREF have filed complaints against the firm, requesting to join in an ongoing lawsuit led by two Ohio public pension funds.

In October 2014, nine days after the Ohio pensions first filed suit, the real estate firm admitted it had made intentional accounting errors, and purposely failed to correct other mistaken figures. Its stock plummeted by 30% within hours of the revelation, and closed trading for the day having lost roughly $2 billion in market capitalization.


“In light of general investor concerns about the quality of the company’s accounting functions, internal controls, and corporate governance (as highlighted by several embarrassing reporting mishaps), ACRP desperately sought to reassure investors that it had righted the ship and that its internal control systems were above reproach,” TIAA-CREF’s complaint stated.

Read more Pension360 coverage of the lawsuit here.


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Ohio Pensions Seek to Lead Lawsuit Against Firm Accused of Fraud


The State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS) are looking to be lead plaintiffs in a lawsuit against an investment firm that allegedly misled investors about its performance and financial state.

The alleged fraud led to investment losses of $7.5 million for the two pension funds, as well as billions in losses for other investors.

From the Pike County Daily:

Following a recent review of securities and accounting fraud allegations, Ohio Attorney General Mike DeWine announced that he has filed a motion for two of Ohio’s pension funds to lead a class of investors in a lawsuit against American Realty Capital Properties (ARCP), Inc.

The news comes after the company, a real estate investment trust based in New York City, disclosed that ARCP officials intentionally misstated company financials and subsequently covered up the accounting irregularities, resulting in approximately $3 billion in losses for the company’s shareholders, including State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS).

“The information American Realty Capital Properties provided pension fund managers was false, misleading, and purposefully hid accounting fraud,” said Attorney General DeWine. “This fraud inflated the true value of the company, causing Ohio teachers and public employees to lose millions of hard-earned retirement dollars.”

The motion alleges that ARCP issued materially false and misleading financial statements by, among other things, overstating reported adjusted funds from operations and then intentionally covering up their impropriety. In addition, it alleges that ARCP improperly accounted for various accruals and expenses that materially affected the company’s reported earnings per share. As a result of ARCP’s improper accounting and cover-up, key performance metrics were overstated and reported net losses for the reporting periods ending June 30, 2014 were understated. Revelation of this alleged accounting fraud by ARCP on October 28, 2014 resulted in losses in the company’s stock value of approximately $3 billion. STRS and OPERS lost in excess of $7.5 million as a result of the alleged fraud.

There are several lawsuits against the firm stemming from the fraud allegations. The motion filed by the Ohio Attorney General would consolidate those lawsuits and name the Ohio pension funds as lead plaintiffs.


Photo by Joe Gratz via Flickr CC License

Ohio Teachers Fund Selling Big Stake in Madison Avenue Skyscraper


The State Teachers Retirement System of Ohio (STRS) is selling a big stake in 590 Madison Avenue, the 1 million square foot New York City skyscraper owned by the pension fund.

The fund will sell a 49 percent stake in the property.

From The Real Deal:

The State Teachers Retirement System of Ohio has put a 49 percent stake in 590 Madison Avenue on the market. The building, which was originally developed as IBM’s headquarters, could fetch as much as $1.5 billion, according to Crain’s.

Ohio STRS will still keep a majority interest in the 43-story, 1 million-square-foot tower. The property on the corner of East 57th Street and Madison Avenue includes a large public plaza.

By selling a stake, the pension fund can capitalize on New York City’s rising real estate prices, according to Crain’s, while still keeping control of an asset that continues to bring in cash. IBM is the building’s largest tenant and occupies 120,000 square feet.

A STRS spokesman talked to Crain’s New York about the decision:

“It is a situation where we would be looking to gauge interest in selling a portion of the building, but we want to retain control,” Mr. Treneff said. Mr. Treneff said that selling a stake would allow the pension fund to capitalize on the city’s soaring real estate prices while still holding onto the majority of what has been a very profitable investment that produces strong cash flow and will likely continue to appreciate.

The skyscraper’s notable tenants include Bain Capital, Morgan Stanley, IBM, Bank of America and Citigroup.


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