For the second time in three years, CalSTRS' investment office has been dragged into a controversy over a housing project that could displace working-class residents.
A tenants-rights group in Alexandria, Va., has urged the California State Teachers' Retirement System to use its clout to prevent the planned demolition of 2,500 units of affordable housing in a blue-collar neighborhood of the Washington, D.C., suburb.
"We are confident California educators would not seek to profit from the mass displacement of low-income workers of color and their families," the group, Tenants and Workers United, said in a letter to CalSTRS officials last month.
CalSTRS spokesman Ricardo Duran said the pension fund is only a minority investor with "no right to influence the outcome" of the Alexandria project. He added that CalSTRS has been told the developer plans to create affordable housing in the affected neighborhood.
Nonetheless, a California lawmaker is pushing CalSTRS to pressure the Virginia developers to make a greater commitment to affordable housing.
"I hope that you will do what is in your power," Assemblyman Tom Ammiano, D-San Francisco, said in a letter last week to CalSTRS. The teachers' fund controls $161 billion in assets and is the second largest U.S. public pension system, after CalPERS.
The Virginia controversy has erupted three years after a big CalSTRS real estate investment in New York ended disastrously in two ways.
CalSTRS lost all its money on the deal $100 million and was criticized for running roughshod over middle-class tenants. CalPERS, the California Public Employees' Retirement System, lost $500 million on the deal and took a similar public-relations beating.
The investment was in a massive apartment complex that was subject to New York's rent-control laws. Tenants said the landlord engaged in a campaign to drive people out so it could legally raise rents on new occupants. The plan flopped when the real estate market collapsed.
Afterward, CalSTRS and Cal-PERS adopted policies forbidding investments in deals based on forcing tenants out of rent-controlled housing.
The Virginia investment doesn't eliminate rent-controlled housing, so Duran said it doesn't violate CalSTRS policy.
But Ammiano said the essence of the policy is being ignored. "This is just déjà vu all over again," he said this week.
In Alexandria, developer JBG Companies plans to replace 2,500 affordable apartments with more than 6,000 units of upscale housing.
CalSTRS didn't invest directly in the project. In 2006, it committed $300 million to an investment fund called MacFarlane Urban Real Estate Fund II. MacFarlane teamed with JBG to redevelop the Alexandria property.
Duran said CalSTRS' share of the Alexandria project represents less than 15 percent of its $300 million commitment.
JBG couldn't be reached for comment. A JBG website says JBG will spend $120 million on affordable housing and nobody will be forced to leave the area.
"JBG will work with every existing resident to find them a new apartment within (the area) and pay an allowance for moving expenses."
Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.