SACRAMENTO, Calif. - A firm that didn't get picked to run a $100 million net lease real estate program for the $82 billion California Public Employees' Retirement System is appealing.
Pension fund officials wouldn't name the firm that has appealed the decision to hire W.P. Carey over three others: U.S. Realty, The LCP Group and Met Life Real Estate Investments.
A U.S. Realty spokesman declined to comment; officials with the other two unsuccessful bidders said their firms did not appeal.
The appeal was made in connection with a memorandum that originated in W.P. Carey's offices and contained personal attacks and criticisms of the other three contenders.
Officials with the California fund declined to discuss anything other than the appeal process.
The memo at issue was sent anonymously to Dale Hanson, chief executive officer of California Employees, Jan. 26. It then was sent by the investment staff to the system's trustees. At least one trustee said the memo played no role in the selection of W.P. Carey.
But in a Feb. 9 letter to the firms acknowledging receipt of the memo, James Burton, the retirement system's assistant executive officer, told the real estate managers they should be prepared at their presentations to the pension fund to discuss the contents of the memo.
In a Feb. 10 letter to Mr. Burton, William P. Carey, chairman of W.P. Carey, said the document was "a partial copy of a confidential, internal memorandum that was prepared especially for and at the request of a marketing consultant who was seeking our business in connection with the advisor search."
"Under no circumstances did we or would we authorize such a document to be shown or distributed to any staff member, trustee or consultant of CalPERS," Mr. Carey said in his letter. He did not identify the consultant or the sender, and he declined to discuss the matter.
In his letter, Mr. Carey asked that the retirement system staff not share it with the trustees, and "to the extent that the document has been distributed, we ask that it not be considered in the selection process."
Mr. Carey said none of "the other finalists are run by 'bad people.' Those I know I like."
Yet not one of W.P. Carey's three competitors was spared mention in the memo.
Many allegations in the memo are unsubstantiated. Because of this, Pensions & Investments chose not to reveal names.
Academic credentials and professional accomplishments of the principals at the respective firms were questioned in the memo.
In a description of one firm's approach to the business, the memo said: "They don't think as fiduciaries. To them, the investor is a chump to be taken advantage of."
The memo said one of the firms is believed to be in danger of bankruptcy and operates at the pleasure of a federal regulatory agency.
The performance of all three has been poor in comparison to W.P. Carey, the memo said.
It is not known if the California Employees' consultant Pension Consulting Alliance investigated any of the issues in the memo, prior to or after their publication. Randy Zisler, the consultant, declined to comment. Mr. Zisler has since announced he is leaving PCA to join Nomura Securities International as director of real estate research.
Fund trustee Jake Petrosino said the letter was totally discounted by the board. "We never asked them (the advisers) any questions about it," he said.
