The Arkansas Teacher Retirement System on Friday approved a deal for Jim Lindsey of Fayetteville and other investors to buy back the system’s almost 50 percent interest in a group of apartment complexes in Oklahoma.
The retirement system invested about $42.4 million in 2001 with Lindsey on the development of 1,704 apartment units in Broken Arrow, Moore and Owasso, Okla. For the first five years, the retirement system received a 7 percent annual return on the investment and after that it increased to an 8 percent annual return, said George Hopkins, executive director of the retirement system.
Lindsey, who owns Lindsey Management Co. in Fayetteville, and the other investors are negotiating to get financing to buy back the retirement system’s investment, Hopkins said.
“What we get is all of the money we invested back plus the 7 [percent] and 8 percent return to the day it closes,” Hopkins said.
The retirement system approached Lindsey about the possibility of selling its 49.5 percent interest in the apartments, Hopkins said.
“We saw in time that when you have 25- or 30-year old apartments, there will be a lot of maintenance going on,” Hopkins said. “We just didn’t see how this investment could be properly maintained when there is 16 percent [total to the system and Lindsey] coming off the top of the cash flow. We like apartments but we like them in a more diversified way. There have been discussions for a long time.”
The proposed purchase price to be paid to the retirement system is about $46.3 million, which includes the initial investment plus $3.8 million for the return of 7 percent and 8 percent.
Scott Rogerson, a spokesman for Lindsey Management Co. in Fayetteville, said Lindsey expects to be able to obtain financing for the buyout.
The retirement system’s board of trustees approved several investments Friday:
Up to $50 million in the Macquarie Infrastructure Partners III Fund of New York, the system’s first investment in the infrastructure asset class;
Up to $30 million in the Cerberus Institutional Real Estate Partners III fund of New York;
Up to $25 million in the Vista Foundation Fund II.
The board also approved a program to allow up to 7,000 inactive retired educators who worked for more than five years to buy out their future benefits at a discounted price, Hopkins said.
P.J. Kelly, a consultant for Hewitt Ennis Knupp, the system’s investment adviser, provided an update on the performance of the system’s overall portfolio.
The preliminary return on the retirement system’s $12.7 billion portfolio was 0.6 percent for the three months that ended June 30 and 13.5 percent for the fiscal year that ended June 30. The portfolio has returned 8 percent a year for the past 10 years.
Lindsey Management was sued in November over allegations of multiple violations of Arkansas’ Deceptive and Unconscionable Trade Practices law.
Some residents of Benton, Dermott, Little Rock and Springdale filed the lawsuit. They claim that Lindsey developed a scheme in which the title to each property is held by a separate legal entity to avoid liability.
Business, Pages 25 on 07/27/2013