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The Magazine of the American Landowner is an essential guide for investors, landowners, and those interested in buying or selling land. The award-winning quarterly is known for its annual survey of America's largest landowners, The Land Report 100.

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purchase and development of the Idaho property. e way the deal was set up, M3 would not only be paid regular development fees but would also be an equal partner with the pension, despite having put no money on the line. Had the venture been successful, M3 stood to reap significant returns on money that taxpayers and first responders had invested. Months after the initial busi- ness plan, CDK and M3 persuaded the pension to buy more land, raising the pension's investment at that point to $64 million. M3 partners Bill Brownlee and Scott Schirmer moved forward, pur- suing annexation by the town of Eagle and initiating plans for new roads, nine new schools, 14 neighborhood parks, water and sewer systems, fire stations, a police station and a tax district to pay for it all. e project met furious opposition from many Boise-area residents, who didn't want to see huge tracts of sce- nic foothills overrun by development. On a Monday evening in 2006, nearly 200 people packed into Eagle Middle School's cafeteria. After an hourlong presentation by M3's Brownlee, people called out questions about how the project would affect roads and water supplies. Brownlee told the crowd the project would take more than two decades to build out, e Idaho Statesman reported the next day. A community newsletter produced by M3 later said: "You can be assured of our long-term commitment to the city of Eagle — twenty years — we're in this for the long haul!" Kathy Pennisi, who raised four kids on a rural property at the edge of the foothills, remembers some of those early meetings. "We just thought that they were going to flip it," she said of M3 and the land it controlled. "ey were just getting in to get the money, and they didn't care what happened to the development after." A project pro forma that M3 and CDK presented to the pension said the investment was to be completed in six years, after lots were sold to builders. But the real estate bubble was about to burst. ough the pension's leaders hadn't seen it coming, others had. In June 2005, just before the pension made its Idaho land bet, e Econo- mist magazine's cover featured a brick falling through blue sky. Etched on the brick were the words "House Prices." e main story began: "e worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops." GOOD MONEY AFTER BAD By 2007, the demand for real estate was vanish- ing, just as the pension had ramped its investments in Idaho and elsewhere past $900 million, equivalent to more than a quarter of its $3.4 billion net worth at the time. Tettamant and the board were not prepared to concede defeat. As the fund's real estate ventures sank, the pension and its advisers tried to keep the projects afloat — often putting in good money after bad. CDK defends its efforts to save investments during that time. "No assets were lost to foreclosure, even during the second worst recession in US history," the firm says. Tettamant denies responsibility for the pension fund's decisions, saying he only followed the board's instruc- tions. His attorney, Michael McColloch, said in an email: "Only the trustees made the investment decisions for the pension fund, based on the recom- mendations of registered investment advisors, brokers, actuaries, attorneys, auditors, and accountants." During a 2012 interview, Tettamant claimed a hands-on role when asked whether he acted as a fiduciary for the fund. "Legally I'm not, because I'm an employee of the board," he said. "But we" — he and his staff — "operate that way, like we are. We vet every decision for those 9,200 families." As the recession took hold, one of M3's partners, Schirmer, began setting up loans that would later draw scrutiny. He created companies on behalf of a business ally that lent the Idaho venture money. Schirmer's position on both sides of these loans — representing borrower and lender — would later be criticized in the pension fund's lawsuit against CDK. Documents CDK provided to e Dallas Morning News show the fund's lawyers were aware of Schirmer's relationship to the lender and suggest Tettamant was as well. In one case in early 2007, documents show Tettamant signed off ahead of such a loan, as did Brown, the pension board's chairman. Brown signed "on behalf of the Board of Trustees," though board minutes don't indicate that the rest of the board pub- licly discussed or voted on the matter. Brown declined to comment for this story. Both the M3 partners and the CDK partners declined to be interviewed. But in its written responses, CDK said the Schirmer loans were set up only after CDK, M3 and the pension were unable to secure bank loans. CDK says the loans' interest rates, some of which were 12 percent, were reasonable given the risk involved. In total, companies set up by Schirmer and his business ally loaned the pension fund's Idaho project, along with a similar venture that M3 man- aged for the pension in Colorado, more than $14 million, deed records show. e loans would later be repaid by loans from the pension, which it funded through a line of credit with Bank of America, and by other bank loans guar- anteed by the pension. Last year, the pension's lawsuit against CDK said the land ventures paid off the Schirmer loans in full — both principal and inter- est — but still owed Dallas public safety workers $47 million. e suit, filed under Gottschalk's leadership, represented a major parting with CDK — long among the pension's most trusted advisers. CDK's partners — Kenneth Cooley, Jon Donahue, and Brent Kroener — had backgrounds in 89 L ANDREP ORT.COM FALL 20 18 | e LandReport

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