Sunday, September 21, 2014

A big potential loser from stalled B2, the Arizona State Retirement System, stays mum

The potential losers in the dispute over the stalled B2 tower include Skanska USA and Forest City Ratner, partners in--and now legal adversaries regarding--the factory set up to supply what is supposed to be the world's tallest modular tower.

But the most vulnerable party may well be the majority owner. As I wrote 9/2/14, while Atlantic Yards B2 Owner is represented and managed by Forest City Ratner, the building will be owned 75% by the Arizona State Retirement System (ASRS).

The ASRS surely foresees delays in projected revenues and may, depending on the outcome of the legal process (and the contour of its contract with Forest City), may have to absorb some increased costs or damages.

The ASRS is investing approximately $300 million with Forest City Enterprises to build several towers, contributing 75% of a $400 million investment fund. B2 is one of the first two buildings being built by the FC Cactus Residential Development Fund.

Due diligence and some stonewalling

The lingering question--especially for the retirees who depend on the returns from ASRS assets--is whether the state agency did appropriate due diligence regarding this untested process. 

As I wrote, the only public mention on the ASRS website--a slide dated 11/18/13 from an Asset Class Review of Inflation Linked Assets--stressed the advantages of the investment but did not acknowledge the risk.

The ASRS does not seem particularly open to scrutiny. A call to a spokesman for comment was not returned, and a Freedom of Information request was rejected.


From this ASRS document

For now, there's almost no discussion in publicly available materials on the ASRS web site about the tower, except for the above slide.

Perhaps that will change, if some on the ASRS board or some of its clients raise questions. 

Alternatively, if the investment fund partners end up in court--though I have no reason to think legal action is currently contemplated--we'll learn more about how much Forest City disclosed risks, and how much ASRS evaluated them.

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