All Mike Witty of Pinnacle Investment Consultants, Colorado Springs, Colo., wants is some understanding.
According to him, there is a perfectly good explanation as to why he invested $27 million - 35% - of the $76 million El Paso County Pension System's money in real estate debt and equity, in the fund's own backyard.
Mr. Witty's company made the investments while he also served as the fund's benefits administrator, earning a $55,400 salary.
He declined to speak at length because he and the pension board are party to a lawsuit brought by the Colorado Springs Gazette Telegraph, the local newspaper; an employees' association; and the El Paso County Commissioners. The commission appoints two members to the board of trustees and makes contributions to the pension fund.
The plaintiffs want access to fund records, which they contend are public documents. An accountant is waiting to audit the fund.
In a short conversation, Mr. Witty said the fund is "making a lot of money" on its real estate investments. "We'll return the retirement plan 12% on $30 million in 1994," he said. "If we could get everyone to understand what we are trying to do, we'd be better off."
El Paso County Commission Chairman Loren Whittemore said he is not opposed to real estate investing, "as long as it's within reason and done prudently."
"In comparison with other pension funds, we are 300% more invested in real estate than the average," said Mr. Whittemore.
The situation is perplexing because the retirement system has William M. Mercer as its investment consultant. Don Eibsen is the Mercer consultant that works with the board.
At a board meeting earlier this month, Mr. Eibsen said he would like the fund's allocation to real estate to be lower, according to the Gazette Telegraph.
But what was he doing and saying when the investments were made? Records show he had been with the fund as early as 1992.
A Mercer spokesman said the company doesn't comment on client matters.
Pensions & Investments was able to get a copy of the board's investment policy dated Aug. 25, 1992.
In 1992, the system's long-term target for real estate was 15% and the range was zero to 20%. Direct property investments must be located in El Paso County.
When and why did the allocation to real estate change? What are the characteristics of the fund, such that it could accommodate 35% of its total assets in real estate?
At least there is an answer to any conflict of interests questions surrounding Mr. Witty's employment and his company's business with the fund.
The El Paso County District Attorney determined no criminal laws had been violated because "all conflicts of interests were clearly disclosed by the retirement fund board and acquiesced in by the board," a report stated.
A civil action is moot because, according to Colorado statutes, only the retirement board has the legal authority to void a contract with an employee to the fund.
Mr. Witty resigned his position in July, and the board renegotiated all contracts with Pinnacle.
"The retirement fund board has made it abundantly clear to the district attorney's office that the majority of their members still do not wish these contractual arrangements to be voided," the report stated.
Stay tuned.
MetLife change a mystery
Why the secrecy surrounding the departure of Jerold Hoerner as president and chief executive officer of MetLife Realty Group, White Plains, N.Y.?
An announcement of the selection of Thomas P. Lydon Jr. as the new CEO made no mention of Mr. Hoerner's departure.
When asked why Mr. Hoerner no longer was with the unit, and how long he had led it, Robert Henrikson - executive vice president and head of pension operations for MetLife, which oversees the realty group - declined to comment, saying he preferred to focus on the future.
MetLife also declined to widely share with its clients the why and when of Mr. Hoerner's departure, some clients said.
Only after repeated questions did MetLife craft a response explaining why clients were not been told.
According to Joe Madden, a company spokesman: "During Mr. Hoerner's brief tenure as head of MetLife Realty Group, which was formed in the spring of 1994, the company didn't correspond with some clients because it was undergoing a transitional period, as it had only recently been formulated.
"Since we didn't inform the clients of his joining the company, we didn't think it was necessary to inform them when he departed," he said.
Besides, day-to-day communications was handled by the client relations department, which didn't change, Mr. Madden said.
Why Mr. Hoerner left is important because his tenure was short. Was it performance related?
The flagship Tower Fund has outperformed the Russell-NCREIF index for the five years ended Sept. 30, but slightly underperformed for the one year.
MetLife's closed-end I and II funds have underperformed the benchmark for the five- and one-year periods. But they were not the worst performers in the real estate adviser universe.
Mr. Henrikson said Mr. Lydon was an attractive candidate because of his skill at enhancing value.
Mr. Lydon oversaw the reduction of Mutual Benefit Life Insurance Co.'s $6 billion real estate portfolio to $3.5 billion.
Mr. Henrikson hopes to sell pension funds on Mr. Lydon's value enhancement skills.
"He (Mr. Lydon) has been part of a team of investment professionals that look at real estate relative to other asset classes and (knows) how to add value across a broad portfolio.
