Desert Troon – Millions Lost
Desert Troon Loses PSPRS’ Real Estate Investment For Five Years
September 2014 – According to the blog PSPRS.info, as verified by PSPRS consultant New England Pension Consultants, the Desert Troon Companies have lost the Arizona Public Safety Personnel Retirement System’s investment for AT LEAST the past five years based on the one-year, three-year, and five-year performance measurements reported by NEPC to the PSPRS Board of Trustees.
Desert Troon’s Verified Performance for PSPRS:
• -16.4% One-year performance
• -3.1% Three-year performance
• -4.7% Five –year performance
LINK (see page 50): PSPRS 2014 Investment Summary by New England Pension Consultants
- At the end of the past fiscal year, PSPRS’ total real estate portfolio had a market value of $873,820,740. This accounts for 10.8% of PSPRS’$8,127,506,488 total market value. The 10.8% allocation falls just about right in the middle of PSPRS’ target range for real estate investments of 6-16% of the total investment portfolio.
- The Desert Troon commitment to the real estate portfolio is $297,862,000. This makes up 34% of the real estate portfolio and 3.7% of PSPRS’ total investment portfolio.
- So we can see that Desert Troon has a grossly disproportionate share of PSPRS’ real estate portfolio.
- The total real estate portfolio had a -0.6% return for the past fiscal year. This compares to the benchmark National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index return of 11.2%. Real estate was the only asset class to have a negative return for the past fiscal year.
- The Desert Troon commitment had a return for the past fiscal year of -16.4%.
- If we do the math, the Desert Troon investment had an annual loss of $58.43 million
- If we look at the three-year returns… Desert Troon is one of the two to have a negative three-year return (-3.1%).
- Desert Troon is one of the six with a negative five-year return (-4.7%).
- Desert Troon did have the dubious distinction of being the only real estate investment held for at least five years that had negative returns for one, three, and five years. I guess they get some credit for consistency.
- In summary, there appears to be an over-weighting of the real estate portfolio in Desert Troon while the portfolio itself has been consistently underperforming over the past five years.
- Regardless, it does appear that the relationship will need to change so that PSPRS can diversify its real estate portfolio and not have its returns so closely tied to a single company.
As published in the Arizona Republic in 2013:
As published in the Arizona Republic on September 30, 2013: “The trust’s collective losses from properties managed by Desert Troon from fiscal 2009 to 2012 were at least $284 million, according to reports compiled by The Republic.”
As published in the Arizona Republic on January 22, 2014: “Desert Troon manages a portfolio of retail, residential and commercial real-estate properties for the trust and was paid at least $12 million in fees in 2012, according to trust records. The company, which reported at least $103 million in losses on trust investments in fiscal 2013, did not return a call seeking comment.”
That adds up to 387. $387 million! That’s almost $400 million in losses!
Who is watching? Who is watching the watchers?
52,000 pensioners and 6.5 million taxpayers are watching!
(Figures according to the Arizona Republic’s analysis)