The California State Teachers Retirement System on Thursday committed to a $300 million expansion of its West Sacramento headquarters, voting to build a second 275,000 square foot office building along the Sacramento River.
CalSTRS, the $229 billion teacher pension fund, has been considering an expansion since a 2014 study suggested it would need more office space than its 17-story headquarters could provide.
The teachers’ retirement board voted to build a second tower on its campus rather than lease space or buy an existing building in downtown Sacramento or delay construction. CalSTRS anticipates that it will be able to move into the new structure in 2021.
The unanimous vote reversed the signals several board members sent at a September meeting, where they expressed uncertainty about whether they were ready to move forward.
They also heard two months ago from lobbyists for teachers and retired teachers who said the vote might be unpopular with members. Representatives from those organizations this week spoke in favor of the project, a CalSTRS spokeswoman said.
About 1,150 people work at CalSTRS’ headquarters, and that number could double when the pension fund reaches its full staffing.
“A new, expanded headquarters facility allows us to grow, attract and retain that talent,” CalSTRS Chief Investment Officer Christopher Ailman said in a news release.
CalSTRS, like the larger California Public Employees’ Retirement System, is considered underfunded because its assets are worth about 70 percent of it owes over time to teachers and retirees.
CalSTRS plans to fully occupy the new building when it opens, although it would not need immediately all of the space in the two structures. CalSTRS plans to lease space to tenants in the main headquarters while it slowly increases its number of employees.
CalSTRS moved into its headquarters in 2009. The building anchors West Sacramento’s riverfront development plans, and city leaders celebrated the pension fund’s vote to expand there.
“CalSTRS has been a great neighbor the last 10 years and we’re enthusiastic about their expansion. I’m thrilled that West Sacramento will get progressively designed and innovative office space on the leasing market that will bring in tenants who share CalSTRS’ environmental and community spirit,” West Sacramento Mayor Christopher Cabaldon said.
CalSTRS officials said in the news release that they expect to release a final cost estimate next year. That sum is “not to exceed” $300 million, CalSTRS said.
“There is no comparable office space available for lease in the Sacramento region that sits right in the urban core,” said Ailman, the chief investment officer. “This expansion will allow the investment office to continue to grow our internal management. The more investments we can manage in West Sacramento, the less we have to pay external Wall Street firms.