Legislature(1993 - 1994)

01/28/1994 09:00 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 CHAIRMAN LEMAN announces the committee will now take up SB 245                
 PERMANENT FUND INVESTMENTS IN REAL ESTATE and calls Mr. Scott and             
 Mr. Kelly of the Permanent Fund Corporation to the committee table.           
 Number 476                                                                    
 JIM KELLY, Research and Liaison Officer, Permanent Fund                       
 Corporation, passes out four Permanent Fund real estate portfolios.           
 Number 470                                                                    
 BILL SCOTT, Executive Director, Permanent Fund Corporation                    
 introduces himself, Mr. Kelly, and Malcolm Goepfert, the portfolio            
 analyst from the real estate department of the Permanent Fund                 
 Corporation.  He states the purpose of SB 245 is to authorize the             
 permanent fund corporation to invest up to 100% in real estate                
 investments.  The corporation has found that the current 40%                  
 ownership limitation does not give the corporation as much control            
 as it needs over assets.                                                      
 Number 447                                                                    
 MR. SCOTT claims the corporation has come a long way and learned a            
 lot in the ten years since the corporation has been authorized to             
 invest in real estate.  The Alaska Permanent Fund Corporation is              
 recognized nation-wide as being a very good real estate operation.            
 Number 423                                                                    
 MR. SCOTT says that the corporation needs to have the ability to              
 invest 100% in some types of real estate, particularly those in the           
 smaller range, under 25 million dollars.  He states the corporation           
 will still be involved in co-investing, but that it needs the                 
 latitude to invest 100% in some smaller projects.  The board of               
 trustees of the corporation voted unanimously in support of being             
 able to invest 100% in some real estate investments.  The                     
 corporations' rate of return on real estate investments is about              
 double the national rate of return.                                           
 Number 354                                                                    
 CHAIRMAN LEMAN tells Mr. Scott he wants to review the backup                  
 materials on SB 245.  He asks Mr. Scott how he would feel about               
 only having authorization to invest 100% in small investments, but            
 continue to be required to have co-investors on larger real estate            
 Number 332                                                                    
 MR. SCOTT replies that the chairman's suggestion would certainly be           
 one solution, and the solution in SB 245 was suggested because it             
 was simple and straightforward, but it is certainly not the only              
 Number 315                                                                    
 MR. KELLY adds that the Permanent Fund Corporation has always been            
 very selective in its' real estate investments.  The corporation is           
 allowed to have 15% invested in real estate.  The Current amount              
 invested is under 7%.  The Board of Trustees of the Permanent Fund            
 Corporation has set a target rate of 10% investment in real estate.           
 We believe it will be easier to get closer to the target investment           
 rate of 10% if we have the additional flexibility of being able to            
 invest 100% in real estate investments.                                       
 Number 297                                                                    
 MR. SCOTT says another problem caused by only being able to invest            
 40% in a project is that deals are often not closed with a co-                
 investor because the corporation is not willing to give up certain            
 Number 278                                                                    
 CHAIRMAN LEMAN announces SB 245 will be taken up again on                     
 Wednesday, February 2, 1994.                                                  

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