The new bosses and directors of the $70 billion Pennsylvania Public Schools Retirement System are a legacy of a previous administration whose top executives resigned in late 2021 to address exaggerated profit reports and an investigation into the Harrisburg land sale. I am still working on.
Philadelphia’s federal attorney’s office told the agency last year it would not file charges after a 17-month-long investigation. Public survey results And testimony in recent lawsuits has focused on pinpointing responsibility for bad numbers.
» READ MORE: Starting in 2022: DOJ Investigation of PSERS ‘Ends’ Without Indictment. SEC investigation continues.
Separately, the Securities and Exchange Commission, which turned over PSERS records in investigating relationships between Wall Street investors and consultants and public pension funds, required the time of its attorneys, advisors, and staff to deal with the investigation. I asked how much I spent on Those costs, including his $4.5 million that the Inquirer booked for law firms and consulting firms as of last spring, have increased as agencies still pay lawyers to deal with the fallout. continue.
Meanwhile, PSERS is looking to sell a $1.4 billion real estate portfolio purchased directly by former managers for their pension plans, rather than relying on the usual mix of Wall Street real estate investment managers.
Throughout its history, agencies have oscillated between buying properties directly and leaving those decisions to Wall Street experts. It has adopted this direction since former Executive Director Glenn Grell and his Chief Investment Officer stepped down last year.
At a regular meeting on Friday, trustees approved the sale of properties held by Commonwealth Holdings Inc., one of several holding companies set up to help PSERS manage properties it owns directly. agreed to do so.
PSERS does not comment on the sale of properties directly owned by PSERS or any other pending or recent sale, said agency spokesperson Evelyn Williams.
The holding company owns the Atlanta Airport Marriott, a 630-room hotel PSERS acquired in 1987, and has made several attempts to sell it, according to agency records. An internal PSERS report puts the estimated value of the hotel at $82 million, down from $89 million in 2019.
According to Florida public records and published real estate industry accounts, four apartment complexes owned by PSERS – one each Parkland and Orlando and two Miramar, Floridaeach included in the agency’s $1.4 billion “directly owned” real estate portfolio As of June 30 last year, it has sold for at least $363 million in total over the past four months.
PSERS officials, who did not disclose the sale price, did not disclose how much of the proceeds will go to the agency or how it will be reinvested.
PSERS also owns Galleria, a shopping mall and surrounding property in St. Petersburg, Florida, estimated to be worth more than $300 million in a 2020 report, and a smaller property in San Antonio’s Rivercenter. We are looking to sell commercial properties. ,Texas.
It also sought to sell a property in Harrisburg, three blocks east of its headquarters, an acquisition that came almost without valuation and has been the subject of investigations by federal prosecutors and the SEC.
From 2017 to 2019, PSERS staff redeveloped the land to make it profitable, hoping to move staff from their longtime headquarters on Fifth Avenue to the Old State and Patriot News printing plants and Persuaded trustees to approve $13.5 million to purchase and level out surrounding properties. part of the site.
These properties remain vacant. PSERS hired an appraiser last year when it began preparing the property for sale, and he now estimates the combined value of the property at $1.3 million, according to a person familiar with the agency’s real estate. PSERS also owns farms in several states and a network of trailer parks in the South and Midwest.
PSERS also prepares triennial reviews of past investment returns, as required by state “risk-sharing” laws, to determine whether school employees should pay more or less for pensions. , or have dealt with in the past in deciding to be about the same.
Teachers will pay more than $1 billion for the program this year, and state governments and school districts will contribute about $5 billion. The third source of funding, investment income, is greater in some years than these combined employer and employee contributions, and in some years is negative.
The last time PSERS calculated numbers in 2020, something went wrong. Initially, the company reported that she earned just enough to avoid charging teachers more than her normal 7.5% of their salary. However, in early 2021, we announced that the actual return was slightly lower. This is so low that he forces all school staff hired after 2011 to pay an extra 0.5%, and sometimes more.
When investigated by federal law enforcement, PSERS hired law firm Womble, Bond & Dickinson to conduct an independent investigation into the error.
After Womble issued a report that did not accuse PSERS staff of misconduct and was retracted by the Federal Reserve, PSERS sued one of its consultants, Aon Investments USA. Aon was sued by Delaware County teacher Kevin Steinke, who was also one of his PSERS consultants. In court documents, Aon denies that “performance calculations were somehow improper” or that there were costs to teachers.
Sources inside and outside PSERS say testimony in the Steinke case differs from that collected by Womble, suggesting more to learn from the 2020 miscalculation that sparked a costly and devastating investigation. PSERS hopes to help explain the gaps between the information Womble collected and the statements made in the Aon lawsuit.
As a result, PSERS’ auditors told the trustee on March 22 that they were not ready to present a plan for the agency to consider how to calculate the return on the risk-sharing report.
PSERS spokesperson Williams said the overall risk-sharing calculation is “on track” for the second half of the year. She said the agency does not intend to discuss Steinke’s testimony, some of which has been sealed from public records.
Also at the meeting on Friday, PSERS President Chris Santamaria announced that Joseph Torcella was stepping down from the board where he joined as state treasurer in 2017 and later represented Gov. Tom Wolfe. Santa Maria acknowledged that Torsella pushed for “more transparency” on the board and limited the practice of having contractors pay for staff travel expenses.
Torsella’s resignation will leave Gov. Josh Shapiro to choose his replacement. Shapiro has abandoned the high-fee private investments that PSERS has come to rely on, much like the Montgomery County pension plan did in Shapiro’s time, to be sold by Malvern-based Vanguard Group. He said he prefers to invest more in low-cost index funds like He was its head commissioner in the early 2010s.
