California Public Employees' Retirement System, Sacramento, has built a new headquarters and plans to build three adjacent housing projects (required by the city's planning policies, as the headquarters is being built in a redevelopment area). It will all end up as part of the $196.7 billion system's real estate portfolio — sort of.
The investment staff is not running the entire project, said Michael B. McCook, senior investment officer-real estate. The "R" Street subcommittee — named for the "R" Street Corridor, the section in downtown Sacramento, formerly the site of a railroad line and industrial area, where the project is being built — makes policy for the entire project, including reviewing designs. The board subcommittee built and will manage the new headquarters, budgeted at $265 million in cash. The real estate investment staff, headed by Mr. McCook, is running the housing projects, said Pat Macht, CalPERS spokeswoman.
And the project appears to be accounted for in the same way on CalPERS' books. The office building is listed as a building owned by the system and not part of its real estate investment portfolio, Mr. McCook explained. "It's not part of our real estate numbers. It's a different line item," he said.
CalPERS officials have declined to identify a budget providing overall budget numbers for the proposed housing projects, which could include turning a downtown industrial building and parking lot into housing units.
Meanwhile, CalPERS' headquarters might be as much as 10% over budget. Fund officials have hired a consultant to review the costs, Ms. Macht said. "We don't know if there are overruns yet," she added, and CalPERS officials won't know until the process of settling accounts is over, which could take another year.