Familiar Names, Familiar Practices
The curious story of the resignation of West Warwick’s pension investment consultant brings us around (as you had to know it would) to some familiar names:
In early 2009, [Pension Board Chairman Geoffrey] Rousselle sought out the services of Jeffrey E. Bogosian, an investment broker already known in West Warwick through previous business with the pension board and a friendship with former board member Stephen D. Alves, also a former state senator. …
… Bogosian [is the] owner of Winchester Investment Securities, which is based in the same downtown Providence office building as Alves, House Speaker Gordon D. Fox, and former House Speaker William J. Murphy.
The consultant firm that has resigned, P-Solve, argued against the investment from the beginning, and some of its concerns have a familiar ring:
On July 9, P-Solve produced a 26-page memo urging the board not to invest public pension dollars with Cole. The consultant cited a volatile real-estate market, “an extremely high” fee structure, a lack of transparency, many conflicts of interest and low liquidity. …
[A subsequent memo], just two pages, was far more direct: “There are many reasons why we believe this investment to be wholly inappropriate for the Town of West Warwick …”
The first was “excessive fees,” including “approximately 13 percent in up-front fees to pay commissions, offering fees and acquisition fees.” P-Solve noted that “a substantial portion” of the fees would go to Bogosian’s company, Winchester Investment Securities, for “sourcing the deal.”
No doubt the outcry from concerned Rhode Islanders — specifically those residing in West Warwick and, especially, those whose pensions depend upon the board’s wisdom — will be absolutely impossible to hear. The Rhode Island Way rolls on.
I read in Sunday’s PROJO that, when asked by the reporter, Mr. Bogosian refused to disclose how much his fee was. Since Mr. Bogosian’s fee was paid with taxpayer funds it is Public Record.
Investing 3 million dollars (almost 10%) of the pension funds assets into real estate is, at the very least, unwise. It is easy to understand why the West Warwick Pension System is one of the worst in the state.
The state and town need to stop the practice of appointing unqualified and political connected people to these Pension Boards. There might be one person on the West Warwick Pension Board who is actually qualified to serve. The others are a former State Representative and people who are politically connected in the town.
I might be reading the prospectus incorrectly but it appears that the REIT actually pays the fee. Is that’s true, why did the WW Pension Fund also pay the fee?
Any Attorneys of Financial Consults out there?
Check it out yourself…
Home – http://www.colecapital.com/default.aspx
SEC Links – http://www.colecapital.com/related_links.aspx
Prospectus & Supplements – http://www.ccptiii.com/pro_sup.asp
Good Info on Fees – http://www.ccptiii.com/pdf/CCPT3%20Prospectus%20Dated%204-30-09.pdf
The pension fund didn’t write a check to the broker directly, as the fees are paid by the REIT. However this doesn’t mean that they are not there or do not impact the future investment returns from this product.
The website http://www.reitwrecks.com has lots of useful information on these types of investments (specifically Non-Traded REITs). The Cole Credit Property Trust II (predecessor to Cole III that West Warwick invested in) has already suspended redemption and cut its dividend from 7% to 6.25%.
“The pension fund didn’t write a check to the broker directly, as the fees are paid by the REIT.”
Are you sure the town didn’t cut a check?
This is West Warwick we are talking about.
I wouldn’t be so fast to clear the Pension Board…
Pension Board Chair Geoff Rousselle is a very close personal friend of Steve Alves!