This is the story of how the Florida board that invests public money bet $250 million on a huge Manhattan real estate deal and lost every last penny of it.

On top of the money lost, Florida paid $16 million in fees to real estate developers, bankers and Wall Street money managers who persuaded the state to make the deal.

State elected leaders with potential influence over the pension funds' investments received campaign contributions from some of those same corporate giants. And state pension managers in the real estate unit got performance bonuses.

The big loser was the State Board of Administration, which invests more than $105 billion for 1 million current and future retirees. On the Manhattan real estate deal, its $266 million is now worth a grand total of $0.00.

How the Florida agency wound up in the ill-fated real estate deal is also a story of lessons learned, as the pension agency's executive director, Ash Williams, put it when he informed the state's top officials of the loss.

``We will identify mistakes made, learn our lessons and move on,'' Williams said.

Between 2000 and early 2007, four SBA internal reports and a watchdog group identified problems with the real estate investment process -- including a lack of risk control.

Nonetheless, the managers shifted assets into higher-risk real estate deals, often by joining private partnerships that used borrowed money.

Investing borrowed money, known as leverage, boosts returns in boom times but amplifies losses in bust times.

In August 2006, at the height of the real estate bubble, a senior acquisitions manager in the SBA's real estate unit, Steve Spook, received two overtures to join investment firms bidding for adjoining apartment complexes in Manhattan.

The complexes -- Peter Cooper Village and Stuyvesant Town -- were iconic housing communities, a ``city within a city'' on 80 prime acres overlooking the East River. Metropolitan Life built the apartments for returning WWII veterans in the 1940s. They became an oasis for teachers, nurses and retirees on small pensions, one of the last refuges for the middle class in Manhattan.

In 2006, an average rent-controlled apartment in Peter Cooper Village went for about $1,340 a month, about 40 percent of the average rent in the surrounding area.

New York's rent-control rules limited increases to 7.25 percent over two years, with some exceptions. Tenants could be ousted if their primary residences were elsewhere or if they illegally sublet their unit at market rates.

About a quarter of the apartments paid market rates when MetLife put the complex up for sale in August 2006.

The insurer's whopping asking price -- $5 billion -- made clear that to make a profit, the buyer would have to convert most remaining rent-stabilized apartments into market-rate units. That October, MetLife announced the winning bid, an eye-popping $5.4 billion by Tishman Speyer Properties and BlackRock Realty.

The buyers put in $225 million of their own money, then passed much of the risk to others.

ENTER FLORIDA

Tishman Speyer had vast real estate holdings in South Florida in the 1980s and early '90s and was looking to get back into the market. The company contributed $5,000 to the Florida Republican Party in 2002. Two of its executives donated the maximum $500 to the 2006 political campaign of Gov. Charlie Crist.

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