TALLAHASSEE — A multibillion-dollar Manhattan development formally unwound this week after costing the state’s pension system $266 million and fueling a debate over oversight of the $113 billion fund.
The formal announcement by a group that includes Tishman Speyer Properties and BlackRock Inc., who made headlines with a $5.4 billion purchase of a sprawling property in Manhattan — at the time the largest real-estate transacting in the nation’s history — won’t have much effect on the state’s pension fund, which already wrote off its $250 million investment in the Stuyvesant Town and Peter Cooper Village, a massive apartment complex.
“This should have no bearing on us one way or the other,” said Dennis MacKee, a spokesman for the State Board of Administration, which oversees the retirement fund. “Right now, it looks like what we have on the books is what it’s likely to end up as.”
What the board has on the books is $0, after essentially conceding that the entire investment is gone.
In addition to the quarter of a billion dollars invested in the property, the SBA spent $16 million to cover costs associated with its late entry into the venture. Because the state held an equity position in the project and wasn’t a creditor, it won’t benefit from the group’s decision to turn the property over to its creditors.
MacKee said the investment was part of the state’s strategy to diversify its portfolio generally and within real estate in particular. He said the state invests largely in safe bets, but does take on some high-risk projects in search of the rewards that can follow.
But the investment has also helped fuel a political battle between Attorney General Bill McCollum, a Republican running for governor, and Chief Financial Officer Alex Sink, the likely Democratic nominee for the state’s top office. The two sit with Gov. Charlie Crist, a Republican running for Senate, as trustees of the SBA.
Asked earlier this week about the project’s collapse, Sink called attention to her proposal to expand the trustee group and include more members with financial expertise.
“That’s why I’ve called for pretty serious reforms at the Tallahassee State Board of Administration and I hope that my legislation gets passed,” Sink said.
McCollum has argued that adding members to the board would require a constitutional amendment and has countered with his own proposal to instead overhaul the Investment Advisory Council, which advises the pension fund on its decisions.
“I firmly believe these changes will provide the additional oversight the trustees are seeking, in an effort to protect the financial future of all Tallahassee Florida Pension Fund participants,”