Must pay retiree fund $14.8 million, judge orders real-estate firm

A former investment partner of the Arkansas Public Employees Retirement System was court-ordered on Tuesday to pay the state agency $14.8 million plus interest after failing to respond to a lawsuit resulting from the partnership’s breakup last year.

At the request of the attorney general’s office, Pulaski County Circuit Judge Tim Fox ruled that National Timber Partners LLC, a Massachusetts-based real-estate firm, was in default for not answering the lawsuit by the retirement system, and ordered the company to pay $14,860,208, with interest accruing at 10 percent a year.

At Tuesday’s seven-minute hearing, the judge used a calculator to confirm the financial figures presented by Carlos Borromeo, the retirement system’s chief financial officer.

In a news release, Attorney General Dustin McDaniel said he hoped Tuesday’s ruling would teach a lesson to other companies.

“We are grateful for the court’s order in this case in which the defendant has not responded to our pleadings or appeared in court to defend their actions,” McDaniel said. “Companies that do business with the state are expected to fulfill their obligations or face the legal consequences if they choose not to do so.”

The company’s deadline to respond to the lawsuit was Dec. 19, and the attorney general’s office, representing the retirement system, petitioned the judge two weeks ago to find National Timber in default and order it to pay the money.

The state lawyers did not ask the judge to force National Timber to pay their expenses, but Assistant Attorney General Regina Haralson told the judge they could return to court seeking to have the company ordered to pay the state’s costs to collect the debt, because National Timber’s assets are scattered around the country.

The retirement system sued National Timber in September after the company missed a payment on its 2012 promised $110 million buyout of the retirement system’s interest in their 6-year-old partnership, NTP Timber Plus + Fund 1.

The NTP partnership bought forest lands close to cities, then resold the property for residential or recreational development. The fund’s timberland investments were in states such as Alabama, Georgia, Florida, Kentucky, North Carolina,South Carolina, Tennessee, Texas, Virginia and West Virginia.

The money awarded by the judge represents the final one and one-third payments the system claimed to be owed in the lawsuit.

The retirement system committed $100 million to the partnership in 2006 with the goal of receiving a 10 percent annual return on the investment.

But the investments’ strength began to wane after the 2008 decline in the real-estate market, and by 2012, the retirement system’s staff began to worry that National Timber was going to default on the partnership arrangement.

Fearing such a default would force the system to engage in costly lawsuit that would have to be conducted in Massachusetts because of the terms of the partnership agreement, the agency instead negotiated the $110 million sale of its share of the partnership to National Timber.

The terms of the sale required the company to complete the purchase in three payments - $85 million, $15 million and $10 million - with the stipulation that any dispute be settled in Arkansas courts and that a late payment would make the entire balance due immediately.

The company made its first payment on time but failed to complete the second payment, paying only $10 million. National Timber warned the retirement system that it was unlikely to complete the purchase under the negotiated terms, but promised to pay in full.

The retirement system filed suit in Circuit Court about two and a half months after notifying National Timber it was calling in the balance.

Front Section, Pages 1 on 01/22/2014

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