Police and Fire Retirement System Investments in Detroit properties sparks growth, buildings fully occupied

Aug 22, 2012, 15:39 ET from Police and Fire Retirement System of the City of Detroit

DETROIT, Aug. 22, 2012 /PRNewswire/ -- The Police and Fire Retirement System of the City of Detroit has received full payment on its investment in the One Kennedy Square building and other key properties are seeing stable returns and record occupancies, a report shows.

Just a few years ago when renovation or construction of new commercial projects was planned in Detroit few banks would lend and investments made by the Police and Fire Retirement System have resulted in stable returns, full reimbursements to the Pension Fund with the added benefit of increased occupancy and building density in Detroit.

"The Police and Fire Retirement System is proud of its record of investing in commercial properties within the City of Detroit," said Chairman Matt Gnatek. "All six of the commercial properties in our Targeted Investment Fund are generating good yields and the entire $3 million loan made to the One Kennedy Square project has been repaid in full. No other pension system has made these types of investments to help grow businesses in the City."

Gnatek commented on a report titled the Detroit Targeted Investment Fund that provides up to $25 million of revolving loans prior to the loan repayment from One Kennedy Square.  Many of the development projects, he noted, could not have been done without financing from the Fund. The investment report was prepared by Alex Brown Realty, Inc. and presented to the Board by advisor Marty West at a recent meeting.

"For a long time one of the few capital sources available to developers in the City of Detroit was the Police and Fire Pension Fund," said West. "They had a plan to help stimulate growth in key areas of the city and it has resulted in performing loans and nearly fully occupied office and apartment buildings."

The PFRS invested in the Kales Building, One Kennedy Square, Lafer Building, Union at Midtown, Beethoven Apartments and the College Park Medical Building – all within the City of Detroit. The pension fund is receiving a minimum interest rates ranging from 7.25 percent to 8.5 percent.

"The Police and Fire Pension Board has taken a lot of heat for so-called bad investments," said Gnatek.  "While there have been some isolated projects that went awry, the vast majority – even with the benefit of hindsight – were excellent investments for financial reasons and to help build density in the core city areas and underserved areas of the City and that was exactly what the intent of these investments were at a time when no one would touch City properties."

"Everyone is praising Dan Gilbert and Quicken Loans and other companies for moving downtown and they should," said Gnatek.  "We would appreciate acknowledgment that with Pension Fund monies wisely invested these buildings represent more than 40 stories of buildings with commercial space and apartments now occupied in the City.  We are very proud of helping make this happen at a time when no one else would and the Board was criticized for throwing good money after bad."

Redico, owners of One Kennedy Square, refinanced the 10 story building paying a $3 million mezzanine loan off to the PFRS five months early. The building was refinanced for $27.3 million or $112 per square foot.

"This building has been a great addition to the city skyline adjacent to Campus Martius Park," said Redico CEO Dale Watchowski. "It likely would never have happened without the mezzanine financing from Invest Detroit and the Detroit Police and Fire Retirement System. We are very grateful for their vision and foresight in establishing their Targeted Investment Fund."

The Police and Fire Retirement System of the City of Detroit was founded under City Charter and is the fiduciary for the pensions of all police and fire personnel. As of 2012 there are some 4,000 active members and more than 8,000 retirees in the system. The PFRS has assets of approximately $3.4 billion and is 99.9% funded for pension benefits. The PFRS is a separate entity from the city's General Retirement System. For more information please visit www.PFRSDetroit.org.


SOURCE Police and Fire Retirement System of the City of Detroit