Dallas Police & Fire Pension System is taking a look at its direct ownership real estate investments after losing about $200 million on the investments, said Philip Kingston, pension board trustee.
Mr. Kingston said there is “a strong consensus” on the board to divest and “not go back into direct ownership real estate investments.”
“(These were) risk-inappropriate investments for a public pension fund,” Mr. Kingston said in a telephone interview. “We really lost a lot of money.”
Mr. Kingston did not have the overall size of the investments immediately available.
Mr. Kingston identified two properties in Napa Valley, Calif., as “particularly bad” investments. “These (properties) were bought with the assumption that they could be further developed, which wasn’t possible politically in Napa County,” Mr. Kingston said.
Luxury residential properties in Park City, Utah, and Hawaii have also “lost a lot of value compared to where we bought them,” Mr. Kingston said.
Other holdings Mr. Kingston named were speculative development plays in Arizona and Museum Tower, a residential building, in which the pension fund has a $200 million investment and has been in a prolonged dispute with the adjacent Nasher Sculpture Center in downtown Dallas over the skyscraper’s glare.
Mr. Kingston said the pension fund’s previous administrator, Richard Tettamant, “kind of got enamored of this luxury residential stuff and talked into some of the deals.” Mr. Tettamant quit in June after the board requested his resignation.
“I don’t see that the risk profile was ever appropriate for a public pension system,” Mr. Kingston said.
As of Sept. 9, the $3.4 billion pension fund had an overall 16.5% allocation to global real estate. For the 12 months ended March 31, the real estate portfolio returned -2.4%, compared to its benchmark return of 12.7%.
The pension fund is also an investor in several real estate funds, which are included in its overall real estate allocation.
Any decisions on where to reallocate the funds would likely be put off until the pension fund’s new leadership team is in place, Mr. Kingston said.
The pension fund is currently searching for an executive director and chief investment officer to replace Mr. Tettamant, who filled both roles as administrator. Donald C. Rohan, previously the assistant administrator, is currently filling in as interim administrator. Hiring decisions could be made in three to four months.
Brian Blake, assistant administrator of investments at the pension fund, could not be reached further information on plan’s real estate allocation.