The Arkansas Teacher Retirement System will leave an agreement with a real estate firm to list the system-owned Victory Building in Little Rock for sale for $26 million, the trustees decided Thursday.
The action came after the system’s investment consultant, Ennis Knupp & Associates of Chicago, recommended that the system hold on to the building at 1401 W. Capitol Ave. and get out of its listing agreement with Rector Phillips Morse rather than sell the property.
The agreement expires in the first week of November, and the system must pay the firm its marketing expenses to get out of the agreement now, system officials said.
The minimum price in the agreement “appears to now be below market,” and a pending lawsuit over whether the system should pay property taxes on the building “greatly complicates the [potential] sale through difficulty in obtaining a free and clear title for a buyer,” Ennis officials said in a written report.
The system is charged $328,000 a year in property taxes on the building, but it’s no longer paying the tax because officials believe it’s exempt, and a suit is expected to resolve the issue, system officials said.
In a report to the trustees, system officials said that it’s evident that the building “has turned around in the last two years.” Thebuilding’s net income is about $200,000 a month, or about $2.5 million a year, which is about a 10 percent return on investment based on a $25 million value, according to the staff report. The building’s 88 percent occupancy rate may increase to above 90 percent soon, the report said.
The system invested $44 million in developing the building before its value was written down to about $20 million several years ago, said system director George Hopkins.
Last December, Hopkins said a firm owned by a former Goldman Sachs official offered to buy the building for $23.2 million, but it withdrew the offer after the system made a $24.8 million counterproposal.
The system’s investment committee in September took no action on a $16.9 million offer from LAF Brothers Properties LLC to buy the building.
On Thursday, the trustees also learned that Ennis’ preliminary estimate is that the system’s investment return in the fiscal year ending June 30 was 13.6 percent.
Ennis’ preliminary report shows that the value of the system’s investments was $9.767 billion on June 30. P.J. Kelly of Ennis said the final figures for the system’s fiscal-year investments would be available late next month or in early September.
System officials said investment losses of more than $500 million occurred in May and June “due to the unrest in the markets caused by economic concerns and overseas instability, especially in Europe.”
But, they said, the system “continues to perform well relative to other pension plans.”
On June 20, 2009, the system’s investments were valued at $8.8 billion after they fell in value by about $2 billion as the national recession unfolded and the stock market dived.
The system’s unfunded liabilities totaled $3.4 billion on June 30, 2009, said Hopkins. He said the system’s actuary this fall will figure out how much the system had in unfunded liabilities as of June 30 of this year.
In other action Thursday, the trustees voted to approve the minutes of its June 7 meeting that state they unanimously approved a motion to overturn a decision by Hopkins and found that Pine Bluff School District Superintendent Frank Anthony’s break in employment from the district last summer lasted 30 days - long enough for him to legally collect a pension in addition to his salary.
Former trustee Paul Fair of Little Rock said in a letter to board Chairman Richard Abernathy of Bryant that he voted against the motion to overturn Hopkins’ decision. The trustees voted Thursday to attach Fair’s letter to the minutes of the June 7 meeting.
The trustees’ June 7 decision meant that Anthony, whose salary last school year was $150,000, may continue to collect a monthly pension, which system documents released in June showed was $4,535. Anthony also won’t have to pay back more than $452,000 in benefits that he was paid in a lump sum under a deferred retirementprogram.
The board’s vote followed the recommendation of a hearing officer who heard arguments in March on whether Anthony had met the requirement under state law that he “terminate” employment for 30 days before he returned to work.
Anthony retired at the end of the 2009-10 school year, effective July 1, and returned to work Aug. 1. Two weeks later, Hopkins voided Anthony’s retirement after interviewing Anthony and School Board President W.R. Norful.
Northwest Arkansas, Pages 9 on 07/23/2010