new york city | Pension360

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.

From ai-cio.com:

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.

Photo by Joe Gratz via Flickr CC License

CalSTRS Buys $470 Million New York City Office Building

As part of a joint venture with MHP Real Estate Service, CalSTRS has bought a 1.2 million square foot office property at 180 Maiden Lane in downtown New York City.

The building is the former home of Goldman Sachs’ offices.

From Investments and Pensions Europe:

The US pension fund has invested $260m in the asset – around 55% of the deal – through a joint venture with New York City-based MHP Real Estate Service.

The deal was carried out via CalSTRS’s separate account real estate manager Clarion Partners.

The property is currently 66% vacant, with around 800,000sqft left empty by the departure of Goldman Sachs.

CalSTRS said it had a full-scale capital and leasing plan for the next five years that would result in an increase in capitalisation for the property.

The pension fund classified the 1.2m sqft asset, at 180 Maiden Lane, as value-added.

Gary Rufrano, director and a member of the acquisitions group at Clarion, said there would be “many tenants who will be looking for space” in the area.

“Rental rates in the sub-market are 25-35% less than in Manhattan,” he said.

“There also is the fact that, in the down-town area, new amenities like shops, restaurants and housing options have been added to the sub-market over the past couple of years.”

MHP, which will oversee the day-to-day operations of the property, will carry out a $28m refurbishment of the property’s lobby and amenities.

The redevelopment includes the addition of a cafeteria and fitness centre for tenants.

CalSTRS manages $190 billion in assets.

Photo by Sarath Kuchi via Flickr CC License

New York City Council Weighs Disability Pension Boost For Police

A New York City councilwoman is sponsoring a resolution that would ask the state to increase the disability pensions of certain city police officers.

The resolution has the support of two-thirds of the City Council, but doesn’t yet have the support of the mayor’s office or the Council speaker.

From Capital New York:

Under the current law, uniformed workers are placed into a tier system based on when they are hired. Workers with less time on the job only receive 50 percent of their pensions. Workers hired before 2009—the last time the law was changed —get 75 percent of their pension in disability benefits.

Crowley’s proposal would create parity among the different pension tiers for all employees of the uniformed services.

“Every emergency responder is taking the same risk, and every responder deserves the same disability benefits if they get hurt,” Crowley said.

Since it’s a law that can only be enacted at the state level, the Council must pass what is known as a “home rule message,” indicating to Albany that it supports the legislation and would urge the governor to sign it into law.

Last year, the Council failed to act on the resolution and never passed the home rule message, so the state Legislature was not able to move a corresponding bill. Similar legislation was passed in 2009, but then-governor David Paterson vetoed it.

The Council hearing has not been scheduled yet. The bill will also have to be reintroduced in Albany’s new legislative session before it can be sent to the floor for a vote.

[…]

De Blasio has said he would oppose because of concerns over its cost. But the mayor doesn’t have the power to veto this sort of Council resolution.

Council Speaker Melissa Mark-Viverito has said she is reviewing the request. Her spokesman said today that still hasn’t taken a position on it.

Similar pieces of legislation have been proposed on an annual basis since 2009. In 2009, the legislation was passed but subsequently vetoed by Gov. David Paterson.

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.

Photo by Sarath Kuchi via Flickr CC License

Value of New York City Funds Reach All-Time High After Big Returns

New York City’s pension funds together returned over 17 percent for fiscal year 2013-14, the City’s strongest return since fiscal year 2010-11. As a result, the value of the City’s pension system has reached an all-time high. From Reuters:

New York City’s pension system had a banner fiscal year in 2014, increasing its total value to a record $160.5 billion, Comptroller Scott Stringer is set to announce on Monday.

That is a nearly $19 billion increase from the fiscal year ending July 31, 2013, when the five pension funds had a combined value of $141.7 billion, according to records on Stringer’s website.

As a result of the funds’ performance, the city will save $17.8 billion over the next two decades, due to an above-average rate of return, according to a press release distributed to reporters on Sunday.

“Five years of positive returns are good news for the pension funds and for the city,” Stringer said in the release.

The five combined funds had a 17.4 percent rate of return on investments for FY2014, which ended on June 30. That tops the rates of 12.1 percent in FY2013 and 1.4 percent in FY2012, but falls short of the 23.2 percent rate in FY11. The rate in FY2010 was 14.2 percent.

The assumed rate of return, which is set by the city’s actuary, is 7 percent. That means that if the funds perform below that rate, the city must make up the difference with taxpayer money.

The $17.8 billion in savings will begin in FY2016 and will be phased in over a six-year period. Each year’s incremental savings will be repeated for 15 years thereafter.

New York City is now planning on decreasing its contributions into the System, as the required payments are tied to investment returns; the bigger the returns, the less money the state is legally required to pay into the system.

Over fiscal year 2013, the S&P 500 returned nearly 22 percent.

Pension360 had previously covered the lackluster private equity returns from New York City pension funds.

The New York City Employees’ Retirement System (NYCERS) was 65 percent funded as of 2013, while the New York State and Local Retirement System was 87 percent funded.

Photo: Manhattan amk by user AngMoKio. Licensed under Creative Commons