The Hartford YMCA will honor Earvin “Magic” Johnson Friday for his commitment to investments in urban and low-income neighborhoods.
The state’s pension funds, managed by state Treasurer Denise Nappier, have lost more than $15 million of the $45.6 million they invested in two of Johnson’s urban real estate investment funds.
The Johnson-related urban funds are not the only trouble spot in the state’s real estate portfolio.
In each investment category, the Treasury selects a benchmark index to serve as a performance target for its combined investments in that category. State pension investments in real estate have failed to meet the selected target, the National Property Index maintained by the National Council of Real Estate Investment Fiduciaries.
As of July 31, the state Treasury reports real estate investment returns over seven years as negative .81 percent annually.
The NCREIF index returned 6.7 percent over the same period.
NCREIF also outperformed the state’s investments over a five-, three- and one-year period.
The state’s real estate investments, totaling $1.474 billion, have earned $574 million in payouts and are currently worth $718 million, according to a March estimate.
The state’s investments have lost $182 million in value, or more than 10 percent.
Poor performance in the state’s pension funds primarily hurts taxpayers. The Comptroller makes actuarial calculations to determine how much the state needs to contribute to the pension funds each year. The calculations take into account the current fund balance and estimates of future payouts to retirees.
When the pension fund underperforms, the Comptroller instructs the legislature to deposit additional money into the pension fund to make up for it.
Nappier’s office did not respond to requests for comment before deadline.
Johnson’s company, Canyon-Johnson, has invested two urban real estate funds totaling $872 million. Canyon-Johnson Urban Fund III, the newest fund, will eventually invest $1 billion.
According to the company website, “With nearly $2 billion in committed capital, the Canyon-Johnson Urban Funds are the country’s premier private real estate opportunity funds focused on investments in America’s urban communities.”
The Connecticut Retirement Plans and Trust Funds have committed $50 million to Canyon-Johnson Urban Fund II. Of the $50 million commitment, the state has invested $44.1 million since 2005.
The investment has provided the state with $30,000 in payouts and is currently worth $28.7 million, a decline of 35 percent, according to a first quarter 2010 performance review.
Currently, CJUF II has an internal rate of return – a measurement of annual return – of negative 16.8 percent. The performance report projects a negative 1 percent annual return over the life of the fund.
In 2007, Connecticut committed $50 million to the next fund, CJUF III. According to the performance report, the state has contributed $1.5 million and the fund has borrowed money to make three investments.
The current value of the state’s $1.5 million in CJUF III is negative $829,013.
The Treasury has also invested in four other funds with “urban” in their title.
Connecticut invested $71.4 million in the MacFarlane Urban Real Estate Fund II. The state received a $2.2 million payout and the remaining investment is worth $4.3 million, for a $64.9 million loss.
The state invested $27.2 million in the New Boston Urban Strategy Fund. It is currently worth $13.8 million.
The pension funds have also put money into two RLJ Urban Lodging Funds. RLJ II, out of $50 million invested, has paid out $9.1 million and is currently worth $28.8 million. RLJ III, out of $5.6 million invested, is currently worth $3.4 million.
At negative 16.8 percent, Canyon Johnson Urban Fund II has the second-highest rate of return among the six explicitly urban funds.
Proceeds from Magic Johnson’s appearance will benefit the Wilson-Gray YMCA Youth & Family Center Programs for Youth Development, Healthy Living, and Social Responsibility. Event tickets start at $175.