The Land Report

2018.3

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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It was really shocking. I don't know what they were ever thinking. SH UT TERSTOCK near that, the suit against CDK said. CDK says the pension and its out- side auditors agreed it was reasonable to value the land at cost because it was still under development. at year, Tettamant directed his staff to create a presentation on the Col- orado land as he tried to interest a buyer. "is presentation is for a very impor- tant person, a Russian billionaire," he emailed staffers. But they couldn't make the sale. A brochure that an area resident received in the mail showed some of the proposed features of the development that was later called Spring Valley out- side Boise, Idaho. CUTTING THE LOSSES In 2013, Dallas Mayor Mike Rawlings spurred the city to audit the pension fund's investments. (Tettamant and board members tried to block the audit by withholding records and telling the rank and file that the city sought their personal retirement information.) Rawlings also prompted the removal of several council members from the pension's board, and their replacements began shaking things up. e next year, the board ousted Tettamant. When the pension demanded new appraisals of its land in Idaho and Colorado, the results were devastating. More than $110 million invested by the pension "was no longer reflected in the value of the property," the pension said last year in its lawsuit against CDK. e firm disputes the new lower valuations. Gottschalk, the pension's director, recalls her 2015 tour of the land led by an M3 employee. All the while, she was thinking: No way. "He's telling me where all the homes would go, and where the water treat- ment plant would go, and where there's another road that would come in over the mountain," she said. "It was just so obvious that this was not something we should be in." Umlor, the police sergeant who trav- eled to Idaho in 2005, is now retired. He loses sleep over how things turned out, he says, but he worked hard to research investments. "e real estate market crashed, the recession came and it just didn't pan out the way they were expected to," Umlor said. "But it wasn't through lack of effort or somebody's getting their pockets lined." As the pension sued CDK last year, it negotiated with M3. e talks ended with an agreement that cut M3 out of the land partnership. e pension agreed to pay the firm a final $1.5 mil- lion for M3's interest in the partnership and for M3's efforts to secure an exten- sion of water rights for the Idaho land. Now the pension must figure out what to do with it. Today, a real estate broker tra- verses the land on a four-wheeler. No houses were ever built, no lots ever sold. e vast expanse looks just as it did more than a decade ago, when Dallas' public-safety-workers-turned-real- estate-investors first saw it. Copyright 2017 The Dallas Morning News, Inc. real estate and development and had long worked with the fund. ey were so trusted that Tettamant arranged for the pension to headquarter with them in the same office building. At the height of the relationship, the firm would manage more than $700 million in real estate for the pension. Tettamant and the CDK part- ners threw holiday parties together at the headquarters. Tettamant's staff arranged for Donahue to rent one of the pension's ultra-luxury investment properties — a $10 million ski-in, ski- out mansion in Park City, Utah — at a cut rate. Donahue paid $7,000 per week, records show. e advertised rate was $84,000 per week. e pension fund ended up losing $3.6 million on the investment home, which was not managed by CDK. Donahue says he was unaware of the advertised rate and thought the pension offered him the rental only because it otherwise would have stood vacant. In its suit against the CDK partners, the pension fund raised issues about how CDK valued real estate invest- ments. For many years, CDK didn't have investment properties appraised. Instead, the Idaho and Colorado land was primarily valued by how much money the pension had invested. So even as the real estate mar- ket tanked, the pension fund's books showed the Idaho and Colorado ven- tures maintaining or increasing their values, as tens of millions of dollars went toward legal fees, interest, engi- neering work, marketing and other expenses. On top of those expenses, M3's part- ners were making millions. According to a recent accounting by the fund's current administration, the pension ended up footing the bill for $20 million to M3 in management and develop- ment fees, along with $4 million more to CDK for the projects. anks to all of these expenses, the pension fund valued the Idaho and Col- orado land in 2012 at a combined $180 million. Its market value was nowhere — Kelly Gottschalk DALLAS POLICE & FIRE PENSION SYSTEM 90 L ANDREP ORT.COM e LandReport | FALL 20 18

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