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Saturday, July 13, 1996
VRS endorses partnership attempt
BY JEFF E. SCHAPIRO
Times-Dispatch Staff Writer
The Virginia Retirement System wants to cut a deal with one of the nation's biggest property firms for RF&P Corp. that would finally free up cash for the pension fund.
The VRS board of trustees yesterday unanimously endorsed a letter of intent to attempt a partnership with Charles E. Smith Co. based on selected holdings of Smith and RF&P, a subsidiary of the $21 billion retirement system.
"If it goes through, it's probably the best option under the circumstances," James C. Wheat III, VRS chairman, said after a closed 2 1/2-hour meeting of the board.
A spokesman for Arlington-based Smith declined comment.
Though there was no mention of Smith during the trustees' brief public deliberations, it has been an open secret for several months that VRS and the real estate giant have been engaged in a mating dance.
If a deal goes through — that could happen within two months — it apparently would not include RF&P's prize holding: Potomac Yard in Alexandria, once envisioned as a site of a new stadium for the Washington Redskins.
That would free RF&P to develop the abandoned rail yard, one of the largest undeveloped tracts inside the Capital Beltway, on its own or in a separate partnership.
Smith and RF&P already are partners in Crystal City, an office-residential complex built atop RF&P land. Crystal City, a short distance from Washington, has several big-dollar tenants, many of them federal agencies.
Under the prospective deal with Smith, VRS could finally collect a regular cash dividend from RF&P, though officials caution that a payout would be affected by interest rates and market conditions.
VRS hasn't seen a dime on its investment in RF&P because profits have been kept by the railroad-turned-real estate company rather than turned over to the pension system for other investments.
VRS has been trying to unload RF&P since 1994, when a new board of trustees was installed in response to the political controversy and a federal criminal investigation brought on by the RF&P acquisition.
Other companies are pitching for RF&P, and VRS investment director Erwin H. Will Jr. said that the retirement board will consider additional offers that it views as "legitimate" and "realistic."
That may seem a slight to SFRE Inc. of Alexandria, which has complained in letters to Wheat that its $181 million offer for all of RF&P's holdings — except Crystal City — has not been fully considered.
In another letter to Wheat yesterday, SFRE said:
"It is incomprehensible to believe that you and the board members of the VRS and the RF&P are prepared to totally ignore all but one path that seems to have been given favoritism since day one."
Wheat, who was considering a written response to SFRE, said the firm's "approach was unprofessional and inappropriate." SFRE's holdings include the building that houses RF&P's Alexandria office.
© 1996, Richmond Newspapers Inc.