18  ARKANSAS BUSINESS november 5, 2007

Market NetProjects Value Income*VictoryBuilding,LittleRock $21,151,703 $949,413WoodlandHeightsretirementcenter,LittleRock $12,945,037 -$145,124SouthCenterShoppingCenter,HotSprings $8,270,000 $875,984RoseLawFirm,LittleRock $4,203,000 $387,658ArkansasInsuranceDepartment,LittleRock $4,041,675 $467,865ATRSHeadquarters,LittleRock $3,550,542 $367,716DHSBuilding,Texarkana $1,987,720 $194,882DHSBuilding,WestMemphis $1,660,000 $185,511DepartmentofCommunityPunishment,LittleRock $940,000 $120,000FletcherProperties,LittleRock $680,000 $71,308

PartnershipsLindseyPartnership,Oklahoma $42,428,103 $3,289,189ATRSownsa49percentstake ingolfcourse/apartmentdevelopments inBrokenArrow,OwassoandMoorethroughlimitedpartnershipswithLindsey&AssociatesofFayetteville.AmericanCenter1&2,Nashville,Tenn. $15,990,844 $421,379ATRSinvestednearly$17milliontoacquirean80percentstakeinthe412,000-SFofficecomplexinDecember2000.CooperRealtyInvestmentsofRogersownstheremainingstakeinthisoverall$71milliondeal.

*FiscalyearJuly1,2006-June2007.

ATRSRealEstateHoldings

$55  million  with  the  InG  Debt opportunity  Fund  II,  managed  by new  York’s  InG  Clarion  Capital. The $750 million fund will consist of pooled  mortgages  secured  by  office and retail projects around the nation.

Later this month, trustees will con-sider  buying  a  stake  in  a  mixed  real estate portfolio of  apartments,  indus-trial  projects  and  more  managed  by Fidelity Investments of boston.

by  Doane’s  reckoning,  it  will  take three  to  five  years  to  find  enough suitable investments to build a $1 bil-lion-plus  real  estate-related  portfolio for  ATrS.  The  bigger  picture  is  to further  diversify  the  pension  fund’s stock-heavy investment mix of its $12 billion in assets.

overall,  Doane  is  happy  with  the pension  fund’s  current  $200  mil-lion  real  estate  portfolio,  dominat-ed  by  Arkansas-related  investments. However, the victory building at 1401 W.  Capitol  Ave.  in  downtown  Little rock is another story, he said.

“The biggest problem there is, from an investment standpoint, it’s going to be  a  long  time before  it’s  profitable,” Doane  said.  “It  will  be  well  beyond my  lifetime,  to  support  the  original investment.”

The pension fund invested more than $42 million to develop the 282,000-SF office  building  and  adjoining  1,000-car  parking  deck  in  2002.  However, separate  appraisals  prompted  ATrS to write down the market value of the project by $22.3 million.

ouch.That  painful  bookkeeping  move 

was  a  formal  validation  of  concerns that  the  project,  first  proposed  in 1998, was a financially suspect propo-sition  supported  by  unrealistic  num-bers.  no  one  has  put  a  pencil  to 

figure the lost opportunity cost of the victory investment.

Championed  with  dogged  deter-mination  by  bill  Shirron,  then-ATrS executive  director,  the  five-year-old building  is  a  beauty  with  its  clas-sic limestone façade, four-story sky-lit atrium and a landscaped waterfall.

but aesthetics aside, Doane doesn’t understand  why  the  victory  building was  launched  in  light  of  its  financial performance.  “I  can’t  speak  to  it  or even hazard a guess,” he said.

In  terms  of  occupancy,  the  project is up to 80 percent, and Doane reports that a deal nearly was struck with the state Attorney General’s office  to  fill the balance.

“We  just  weren’t  able  to  provide them with adequate space, but we sure tried to find a way to shoe-horn them in there,” he said.

The  victory  building  generated  a $949,413  profit  for  the  fiscal  year ending June 30 but is woefully behind the projections used to justify its con-struction.

WoodlandHeightsAnother  underperforming  invest-

ment in the ATrS real estate portfo-lio  is  the  62-unit  Woodland  Heights retirement center in west Little rock. The project recorded a $145,124 loss during  the  fiscal  year  ending  June 30.

“Woodland Heights has never been an  income  producer,”  Doane  said. “We’re not in the business of subsidiz-ing housing, but effectively, that’s what we have been doing by  losing money. Income from residents isn’t enough to cover the costs.”

The  pension  fund  took  ownership of  the  project  as  part  of  a  settlement with  Pat  riley  Sr.,  who  defaulted  on an $11.5 million loan from ATrS.

Though  not  part  of  the  loan’s  col-

ATRS: new Chief Seeks Ways to Diversify(continued from Page 1)

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