The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Tag Archives: teacher’s retirement system

State and Teacher Pensions Invested in Lone Star Funds!

Investing is a tricky thing that I (as a recent college graduate on Americorps wages) don’t pretend to understand. But I do know that responsible investing is crucial, particularly for public pension fund managers, and that socially-ignorant investments is one way that a lot of large, irresponsible companies profit.

As you know, we are working on an exciting campaign in Washington Heights and Inwood with tenants from 16 different buildings in foreclosure owned by private equity backed Vantage Properties. When the Anglo-Irish Bank failed in 2010, Lone Star Funds purchased many of their assets, including the mortgages on these buildings.

To us, it’s not a surprise these portfolios are now in foreclosure. We’ve written before about the Cycle of Predatory Equity, and with Vantage’s problems with harassment. We don’t know much about Lone Star, but what we do know we don’t trust. Like Vantage, they are a private equity company which buys non-performing loans and failed companies or banks to turn a profit. They’re based in Dallas, Texas, and they’re in trouble with the law in South Korea. Lone Star manages many different funds that wealthy people can invest in; the fund that owns the buildings are concerned with is Lone Star Real Estate Funds II (LSREFII) – Clover Trust.

Private equity companies (that become predatory equity landlords) are funded by wealthy investors and, in many cases, public pension funds. Lone Star specifically manages many different private equity funds that wealthy people can invest in. According to Prequin, 26 United States public pension funds (including two in New York State) have invested with various entities connected to the Lone Star Funds. The NY State Pension Fund is invested one of Lone Star’s funds, and the New York State Teacher’s Retirement System has invested $75 million in the specific fund which (we believe) owns the specific mortgages on the buildings in question.

This is compelling information. It means that state employees and more surely teachers’ salaries are invested in a company that is potentially acting against their interest. (We don’t know much about what Lone Star plans to do with these buildings, but a lawyer from the Clover Trust has indicated they are unlikely to meet with tenants.) It means that the very people who live in the building are, without their control, investing a portion of their salaries and retirement into a company that is not providing answers about the future of their homes, and potentially fueling the ongoing housing crisis.

Employees working for the State of Oregon also have pension funds with investments in Lone Star, and they are not happy about it.  Just this April, two public employees in Oregon sued Lone Star Funds arguing that they were not adequately informed that Lone Star’s executives in South Korea were charged of stock manipulation. According to an article in The Oregonian:

The lawsuit focuses specifically on the state’s alleged failure to conduct adequate due diligence before and after Lone Star and its top executive in South Korea were convicted in 2008 of stock manipulation in connection with their buyout of the Korea Exchange Bank. But it is also a broad indictment of the state’s massive bets on risky private equity funds, and a see-no-evil-hear-no evil approach when it comes to money managers who generate profits.

We don’t know why or how New York began investing with Lone Star Funds, but we are encouraged by what is happening in Oregon and hope to explore similar ways to use pension funds as leverage in our campaign.

Are you a teacher? Do you receive a pension fund from the Teacher’s Retirement System and are interested in getting involved in this fight to preserve affordable housing in NYC?  If so, get in contact with us at thesurrealestate@gmail.com or comment on this post.  If you’re not sure whether or not you receive a pension from the Teacher’s Retirement System, click here for more information.

 

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