Advocates call for NC pension to stop investing in private equity firm with ties to corporate landlords
A group that advocates for communities impacted by private equity investments has asked the North Carolina retirement fund to stop investing with a particular private equity group. But the state's investment manager says the retirement fund has limited influence.
The North Carolina Retirement System is the retirement and pension savings for nearly 900,000 active and retired North Carolina public employees. Its size is about $110 billion and it distributes $590 million to more than 350,000 members and beneficiaries monthly. The system is managed by the North Carolina Treasurer Dale Folwell.
As with other major pension investment systems, it manages a variety of investments, including with private equity groups. In a new report, the Private Equity Stakeholder Project lays out how one such group, Landmark Partners, has made investments into real estate companies accused of mistreating rental tenants in order to maximize profits, including to tenants in North Carolina. The Private Equity Stakeholder Project is now calling on Folwell to stop any future investments with Landmark Partners, and to leverage its sizable investment in Landmark Partners to influence landlord reforms in the real estate holdings.
The North Carolina Retirement System should halt any new commitments to Landmark Partners, and it should use its influence as the largest pension fund investor in Landmark to ensure that Progress takes concrete steps to make its housing safe, affordable, and accessible.Private Equity Stakeholder Project
In the decade after the 2008 housing crisis, corporations bought up large swaths of single family homes and have turned them to rentals. Tenant rights advocates have started to shine a light on these corporate landlords, alleging abusive tactics in order to maximize profits. A U.S. House Select Subcommittee in July released a report detailing some of these abuses. That report focused on four companies, including a company called Pretium Partners, which itself owns two companies called Progress Residential and Front Yard Residential. The report found these companies filed for evictions at higher than realized rates during the coronavirus pandemic.
Committee Chairman Rep. James Clyburn said these companies "evicted aggressively to pad their profits."
It's a trend analyzed by a News & Observer series earlier this year.
Progress Residential owns more than 7,700 homes in North Carolina, and Landmark Partners is an investor in Progress Residential. Because the North Carolina pension fund is invested heavily into Landmark Partners, Private Equity Stakeholder Project has called on the Treasurer to use the state's influence to reign in abusive landlord behavior by Progress Residential.
"The North Carolina Retirement System should halt any new commitments to Landmark Partners, and it should use its influence as the largest pension fund investor in Landmark to ensure that Progress takes concrete steps to make its housing safe, affordable, and accessible," according to the group.
Folwell argues that while the investment into Landmark Properties might be sizable, the amount from the state that's invested in Pretium is small – less than $23 million. By comparison, the pension fund has some $2.6 billion invested with Landmark Partners, much of that in other funds.
"Our relationship with Landmark has many different facets to it," he said. "It includes software companies, manufacturing companies, propane gas line companies, all types of investments come in under Landmark."
Nevertheless, he says he's supportive of a push to reduce landlord abuses.
"If there's a person who is spending their money on shelter where the toilet won't flush, the water is not clean, or there's an insect problem, it doesn't matter how many millions or how many thousands of apartments this may be. If that's happening to one person, that's one too many," he said.
While the investment dollars from the state through Landmark to Pretium might represent only a fraction of the state's overall investment with the private equity group, the advocates argue the treasurer could pressure the private equity group to pressure the real estate company.
From a public investment perspective, Landmark Partners has a far larger investment from the North Carolina pension fund than from any other public pension fund in the nation, according to Private Equity Stakeholder Project. Since Folwell became treasurer in 2017, the North Carolina pension fund has invested $2.6 billion with Landmark Partners. No other pension fund has invested more than $500 million and the median investment is $102 million, according to Private Equity Stakeholder Project.
The treasurer's office confirmed there are no immediate plans to change investment strategies.