CalSTRS Invests in Planned Expansion of its West Sacramento Headquarters Campus

Board decision will make more than 200,000 sq. ft. of rentable Class
A office space in CalSTRS’ current riverfront building available for
future lease.

WEST SACRAMENTO, Calif.–(BUSINESS WIRE)–The Teachers’ Retirement Board, trustees of the California State
Teachers’ Retirement System, approved the construction of a nearly
275,000 square foot expansion of its West Sacramento headquarters. The
additional space will allow the organization to grow in order to meet
increasing complexities inherent to implementing the CalSTRS
Collaborative Investment Model
and ongoing administration of the
pension plan, while maximizing investment assets and capital returns for
the fund over the long term.

The board’s decision sets the timeline in motion to construct the
expanded facility adjacent to CalSTRS’ existing West Sacramento
location, with estimated completion expected in mid-2021. Additionally,
the decision to expand will make more than 200,000 square feet of
rentable office space available for lease in CalSTRS’ current riverfront Platinum
LEED
, zero waste certified building. The potential for third-party
lease revenue also further increases the investment capital assets of
the Fund. Demand is expected to be high given the lack of Class A, LEED
office space available in or near the downtown area.

“There is no comparable office space available for lease in the
Sacramento region that sits right in the urban core,” stated Chief
Investment Officer Christopher J. Ailman. “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. In fact, each internal investment manager
added saves the Fund about $1.2 million in external management fees per
year. A critical component of the new CalSTRS Collaborative Model is
hiring quality staff that can oversee and directly manage investment
opportunities. And a new, expanded headquarters facility allows us to
grow, attract and retain that talent.”

West Sacramento Mayor Christopher Cabaldon added, “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.”

In 2006, when CalSTRS approved its current 409,000 square foot
headquarters, future expansion was factored into planning considerations
given forecasted membership, fund assets and staff growth. As the
organization grew, optimization efforts at the existing headquarters
allowed space usage to be extended three years beyond what was
originally intended. This provided CalSTRS with time to diligently
research and examine various expansion options, including construction
at the current location, acquiring an existing building or leasing
additional space in the region.

The building’s expansion space of nearly 275,000 square feet, which is
tightly-budgeted not to exceed $300 million, is anticipated to be
financed through lease revenue bonds, including the possibility of green
bonds. Though the final budget figure is not expected until late summer
2019, analyses of funding options demonstrated that lease revenue bond
financing is the most efficient vehicle and the best long-term value in
terms of cost and operational efficiency.

The building, as designed by ZGF
Architects LLP
along with consultation and oversight from Ridge
Capital, Inc.
and DPR
Construction
, will be the most sustainable in the region, providing
not just environmental benefits, but promoting health and community
connectivity as well. The design effectively realizes the purposes of
CalSTRS member services and employee productivity, while incorporating
construction strategies that are commercially acceptable for a long-term
organizational asset. Additionally, the building will feature 80% onsite
renewable energy, which enables CalSTRS to achieve a Zero
Net Energy
(ZNE) facility designation.

Chief Investment Officer Chris Ailman continued, “Investing in our
expansion contributes to the CalSTRS mission to secure the financial
future of our members by building the assets of the fund and our ability
to efficiently and reliably provide their retirement benefits. And as a
long-term institutional investor, we have a sustained history of
considering the evolving factors surrounding building construction,
including the reduction of resource consumption, while ensuring capital
expenditures are supported by an appropriate return on investment.”

“CalSTRS made a smart move for the economic growth of the region by
making Class A office space available for lease,” said Barry Broome,
President and CEO of the Greater Sacramento Economic Council. “When
CalSTRS built their headquarters 10 years ago, they were thinking ahead
by constructing with high-quality, durable and environmentally
sustainable products on the waterfront, in an area poised for growth—all
factors that attract the best tenants.”

About CalSTRS

The California
State Teachers’ Retirement System
, with a portfolio valued at $229.2
billion as of September 30, 2018, is the largest educator-only pension
fund in the world. CalSTRS serves California’s more than 933,000 public
school educators and their families from the state’s 1,700 school
districts, county offices of education and community college districts.
A hybrid retirement system, CalSTRS administers a combined traditional
defined benefit, cash balance and voluntary defined contribution plan.
CalSTRS also provides disability and survivor benefits. CalSTRS members
retire on average after more than 25 years of service, with a median
retirement age of 62.9, and a monthly pension of approximately $4,475,
which is not eligible for Social Security participation. For more data,
download the CalSTRS Fast
Facts 2017
brochure.

See how CalSTRS demonstrates its strong commitment to long-term
corporate sustainability principles in its annual Global Reporting
Initiative sustainability report: Global
Stewardship at Work

Follow us on Twitter @CalSTRS

Contacts

California State Teachers’ Retirement System
Michelle Mussuto or
Krista Noonan, 916-414-1440
Newsroom@CalSTRS.com

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