A fourth staffer in the investment office at the Arizona Public Safety Personnel Retirement System has resigned in a dispute over how the $7.3 billion pension fund valued the joint-venture real estate assets held by its largest real estate manager.
Paul Corens, lead portfolio manager for real estate, resigned effective Sept. 20, confirmed Doug Cole, a spokesman for the Phoenix-based pension fund, in an interview Wednesday. Mr. Cole said, however, that Mr. Corens did not state the valuation dispute as a reason for his resignation. Citing confidentiality of employee records, Mr. Cole said he could not say the reason for Mr. Corens' resignation.
Mr. Corens said he would not comment on his resignation.
Multiple sources familiar with the pension fund's operations say Mr. Corens resigned because he was concerned that it was not proper for PSPRS to allow its largest real estate manager, Desert Troon, to set its own valuations of its joint-venture real estate portfolio.
An appraiser hired by the pension fund, Ernst & Young, using market value, had calculated the portfolio was worth $89.9 million less than Desert Troon had calculated in the fiscal year ended June 30, 2012, and $82.2 million less for the fiscal year ended June 30, 2013.
Using the valuation calculated by Desert Troon allowed the Arizona pension fund to lessen its losses from a -2.15% return to a -0.79% return in the 2012 fiscal year ended June 30, 2012, a Pensions & Investments analysis shows.
Preliminary data for the fiscal year ended June 30, 2013, show Desert Troon estimated its joint-venture portfolio was worth more than $300 million. That boosted the pension fund's return to 11.48%, instead of 10.35%, which it would have posted if the Ernst & Young market-based calculations had been used.
In a July interview, James Hacking, the pension fund's administrator, said he believed Desert Troon executives were in the best position to value the assets because they were dealing with the properties on a daily basis.
Mr. Hacking has asked the state auditor general to review the pension fund's decision to allow Desert Troon to use the valuation. Mr. Hacking, pension fund managers, consultants and lawyers, contend the valuation approach was accurate.
Mr. Cole said the pension fund is relying on consultants to fill in the gaps from the recent vacancies. He said the pension fund will advertise for new portfolio officers after it completes an operational review of the investment office.