Why the Pa. teachers' pension fund is buying fruit orchards in Florida and nut farms on West Coast
California pistachio and almond ranches, Florida gated communities, vacant buildings near the State Capitol: In a reversal of a two-decades-old policy, civil servants at the $50 billion-asset Public School Employees Retirement System, Pennsylvania’s largest state investment fund, have lately been “directly” buying investment properties, instead of leaving such purchases to outside real estate fund managers.
Officials at the giant pension system have bought seven large properties since 2016, despite a longstanding internal policy that dictated selling, not buying, such holdings. They plan to buy more.
Pension officials say they are snagging properties, as other states have, on a case-by-case basis, with board support and unanimous staff, consultant and legal approval. They say buying properties directly can be more efficient. PSERS has prepared internal reports maintaining that the properties are a good bet, for example, because Florida will keep attracting more residents, and Americans will eat more fruit and nuts. While the properties throw off some income each year, final profits won’t be measured until the properties are sold, years or decades from now.
The new policy comes with risks. Cutting out the middleman may “look very friendly for the pensioners,” said David Adelman, founder and boss at $2 billion-asset Campus Apartments, a real estate investment and finance firm based in Philadelphia. “The question is whether [PSERS] internally has the asset management resources,” at six-figure civil-servant salaries. (PSERS says it does.)
Read more: https://www.philly.com/business/psers-pensions-real-estate-florida-california-farms-atlanta-washington-20190412.html
