W. Sac attracts big-time investor
CalSTRS to build waterfront offices.
By Gilbert Chan -- Bee Staff Writer
Published 2:15 am PDT Wednesday, April 12, 2006
Story appeared on Page A1 of The Bee
West Sacramento has landed an investment powerhouse to anchor the city's ambitious waterfront development.
The California State Teachers' Retirement System, the nation's second largest public pension fund, announced Tuesday an agreement to build a $176 million to $186 million office tower for its headquarters at Raley's Landing.
The decision brings a high-profile investor to the commercial, retail and residential complex along the Sacramento River. The fund also is proposing an 18-story condominium project there.
CalSTRS' decision is a major coup for the fast-growing city and jump-starts the Raley's Landing development, the largest construction project in West Sacramento's 19-year history.
"Riverfront development has terribly languished here. We do expect that you are going to see a succession of development there on the waterfront. I'm hoping we are that catalyst," said Jack Ehnes, chief executive officer of CalSTRS, one of the nation's largest real estate investors with $141.8 billion in assets.
City leaders hailed the news as a major endorsement of West Sacramento, home to the Raley's supermarket chain, the state Department of General Services and Raley Field.
"It's a huge boost for our efforts to take back the waterfront. It's a large vote of confidence by a very savvy investor," said West Sacramento Mayor Christopher Cabaldon.
Unveiled to CalSTRS employees Tuesday morning, the plan calls for building an environmentally oriented 14-story, steel-and-glass tower on 4.57 acres just north of the ziggurat, the pyramid-shaped Money Store building occupied by the Department of General Services.
With a southwestern exposure to take advantage of the sun, the 400,000-square-foot structure will have a facade curved like a ship's sail and offer employees a sweeping view of the Sacramento River, Tower Bridge and Capitol Mall. Future plans call for adding a seven-story, 200,0000-square-foot tower with 20,000 square feet of retail.
CalSTRS is also proposing an 18-story, 150-unit condominium high rise on an adjacent 1.19-acre parcel. Raley's Landing developer Panattoni Development Co. of Sacramento is proposing a six-building office, residential and retail complex surrounding the ziggurat.
CalSTRS will take over the northern half of the development, envisioned as a key part of the city's plan for a walkable community linking the waterfront to the central business district.
CalSTRS "is a huge investor in real estate. They add a lot of credibility to the project," said Al Gianini, senior managing partner CB Richard Ellis in Sacramento, the commercial real estate broker that represented CalSTRS in the deal. "It further validates the city as an office location."
The decision ends a two-year search for a new home that included a survey of employees and a review of more than 35 sites throughout Sacramento County.
West Sacramento, though, had been tapped as the odds-on favorite, especially after state legislation passed in 2004 allowed the fund to consider sites in eastern Yolo County.
"Having that riverfront is just so special," Ehnes said. The city "needed a stable investor in the area. We're not going to be a company that is going to face financial difficulties and shut their doors."
CalSTRS has hired Harbinson-Mahony-Higgins Builders Inc. of Sacramento as the general contractor and Principal Real Estate Investors of Des Moines, Iowa, to oversee the project. The architect is Hellmuth, Obata + Kassabaum Inc., a St. Louis-based firm whose landmark projects include the Moscone Convention Center in San Francisco and the National Air and Space Museum in Washington, D.C.
Ehnes described the building's design as "thoughtful," embodying "the spirit and care of the organization."
The fund plans to close escrow in early summer and break ground before fall. Employees would move into the building in spring 2009.
Officials say the West Sacramento high-rise will be at least the fifth home for the teachers' fund since it was established in 1913.
For the past two decades, CalSTRS employees have worked out of the Folsom Boulevard headquarters near California State University, Sacramento - where they once shared space with Delta Dental employees. Fund officials haven't decided whether to sell the building or lease it.
In recent years, the CalSTRS operation has suffered growing pains and run out of room. The growth was fueled by the state's population boom and the demand for more teachers.
In the past two decades, membership has nearly doubled to 775,917 beneficiaries while assets have skyrocketed to $141.8 billion from $11.3 billion. The work force grew from 255 to 692 full-time employees.
Today, the fund's online and call center fields about 230,000 telephone calls and 30,000 e-mails a year - a significant contrast to the 1980s when staff members took turns answering calls from a single wall-mounted telephone.
"You can't necessarily implement new technologies in these aging structures," Ehnes said. The fund is converting 51 million documents into digital images.
Ehnes said CalSTRS will take advantage of the relocation to map out a new business organization and floor plan to accommodate the next generation of employees.
"State agencies are terrible at work force planning," Ehnes said. "We just don't want to slap in a bunch of Dilbert cubicles. We need to think about how we are going to replace the baby boomers."
Perks such as gyms and on-site child care don't top the list of amenities for the next generation employee.
"They work in a multitask environment. They don't always spend all their time at their desk. They're moving around," Ehnes said. "You have to figure out what we are going to provide that really works."
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CALSTRS HEADQUARTERS AT A GLANCE
West Sacramento will be the new home for about 700 CalSTRS employees who serve 775,917 active teachers and retirees and their families across the state. Here's a look at what the site would include:
• A 14-story office tower with 400,000 square feet of office space on the north end of the Raley's Landing project. The first floor lobby would house a cafe with outdoor dining, conference and training rooms and a boardroom.
• A five-level parking garage with 1,000 spaces and a street-level parking lot with 132 spaces.
• A pedestrian promenade that would be landscaped with native California and drought-tolerant ornamental plants.
• A proposed 18-story condominium high rise with 150 units overlooking the Sacramento River. The complex would be built between the headquarters and ziggurat buildings.
• Future expansion would add 200,000 square feet of office space in a neighboring seven-story tower. The project would have 20,000 square feet of retail.
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