2 principals quit over differences with PCA

2 principals quit over differences with PCA

Two top real estate specialists have resigned from Pension Consulting Alliance over differences with company chief Nori Gerardo Lietz.

The executives–Claudia Faust and Marcus Steele–were the key real estate players at PCA, along with Lietz. Investors, fund managers and rival consultants described their departures as a big blow to PCA, which advises some of the nation’s biggest institutional investors in real estate.

Faust, a nine-year veteran, resigned about two weeks ago. Steele, who joined the company in 2001, quit about a month ago, although he will finish pending assignments for PCA on a contract basis. Both were principals.

While their resignations were independent, both executives were upset with what they viewed as Lietz’s autocratic management style, failure to set up clear-cut compensation guidelines and unwillingness to offer equity stakes in the company to top performers, according to market sources. Faust, in particular, is said to have lamented the company’s drift away from its core consulting business into special projects, which she viewed as draining resources away from pension clients. Faust, Steele and Lietz declined to comment.

Faust, who has an even-tempered personality, was seen as a counterbalance to Lietz, whose combative style has often been a lightning rod for controversy. Indeed, Lietz herself is said to have described her management style as a “benevolent dictatorship.”

Faust’s departure is “a big one for [Lietz] to overcome,” said one market player familiar with PCA. “Claudia has always been a very solid individual. In terms of balance within PCA, Claudia created it.”

At the same time, Lietz has become one of the most successful real estate consultants. PCA’s formidable client list includes Calpers, California State Teachers, Oregon Public Employees and Virginia Retirement. That roster has allowed Lietz to wield great influence in the opportunity-fund world, where managers raising equity eagerly seek her endorsement.

PCA, which was co-founded by Lietz and Allan Emkin in 1988, offers broad-based investment advice to pension funds, but real estate is a main line of business. Faust and Steele were two of six principals at the firm.

The buzz is that Faust may start her own business–possibly a consulting company.

Last year, PCA generated some controversy by providing advisory services to a fund operator–rather than a pension fund. PCA provided prospective investors in funds operated by Deutsche Bank with a “fairness opinion” and due diligence for two new global opportunity funds, in return for about $7 million in fees. Some PCA clients did invest in the Deutsche funds, but on the advice of backup consultants, to mitigate potential conflicts. But that didn’t stop some observers from crying foul, saying the firm was expanding into territory inappropriate for consultants.

COPYRIGHT 2004 Harrison Scott Publications, Inc.

COPYRIGHT 2004 Gale Group