CTPF Statement on DV Urban Realty Partners
CHICAGO – September 17, 2018 – CTPF oversees a diverse portfolio of U.S. stocks, real estate, fixed income, private equity, and international investments which provide risk-adjusted returns while allowing the Fund to “ride out” short-term fluctuations in individual asset classes.
Last month CTPF concluded litigation in a lawsuit related to an investment with DV Urban Realty Partners (DV Urban). In 2005, CTPF joined four other Chicago pension funds and made a $25 million investment in DV Urban’s Real Estate Investment Fund. After the general partner was removed, CTPF invested an additional $5 million in an effort to offset losses and preserve an asset, for a total investment of $30 million. The Fund received a distribution of $11.9 million. The net result of the investment was a loss of $18.1 million.
The Fund’s investment in DV Urban, made more than a dozen years ago, concluded in August 2018 with the signing of a settlement agreement ending litigation.
Charles A. Burbridge, CTPF Executive Director said: “While it is not our intention to receive a loss on our investments, we also know that nearly all investments carry risk. Our job as fiduciaries is to measure risk v. reward. We make decisions that will benefit our members and when there is a loss, we work diligently to recapture the revenue. We recovered 40% of our investment and used this as an opportunity to review the policies we had in place to minimize this type of loss.
The amount invested in this company was very small compared to our total portfolio, and the upside of investing in undervalued properties, supporting development in Chicago was advisable at the time. Unfortunately, the decision came on the eve of the biggest real-estate downturn in history, and the investment didn’t perform as expected.
The current Board of Trustees has hired additional staff members to oversee this portfolio, and we have achieved solid performance in our overall real estate portfolio with an 11.3% gross return over the past five years. CTPF operates transparently, and we encourage members to read more about our investments in our Comprehensive Annual Financial Report.”
Frequently Asked Questions
How does CTPF allocate its assets?
CTPF’s current asset allocation policy is:
Fixed Income 23.0
Private Equity 5.0
When Did CTPF Invest in DV Urban Realty Partners?
In 2005, CTPF joined four other Chicago pension funds and made a $25 million investment in DV Urban’s Real Estate Investment Fund. After the general partner was removed, CTPF invested an additional $5 million, for a total investment of $30 million.
How much did the Fund recover from DV Urban Realty Partners?
The Fund received a distribution of $11.9 million. The net result of the investment was a loss of $18.1 million.
Why is this coming up now?
The investment generated lawsuits which recently concluded. CTPF has officially closed the books on this investment.
What kind of investments were these?
The company invested in underdeveloped areas of Chicago with holdings in commercial, residential, and industrial sections of the city.
What percentage of CTPF’s assets were invested with DV Urban Realty Partners?
When this investment was made, CTPF allocated 7% of its assets to private real estate. The investment in DV Urban was less than 0.2% of CTPF’s total fund assets.
Who vetted these investments for CTPF?
At the time, the proposed investment was researched and evaluated by the Fund’s former real estate investment consultant, Townsend Real Estate Consultants. Townsend conducted a one-year due diligence process before recommending the investment.
Who manages CTPF’s current real estate portfolio?
Today CTPF employs a team of Investment professionals inclusive of a dedicated real estate investment portfolio manager and an investment consultant, Callan Associates LLC, which acts as the Fund’s master consultant and real estate consultant providing additional advice and counsel.