Stop CalSTRS Risky Real Estate Investments: A Ticking Time Bomb for CA Taxpayers
CalSTRS recently lost $100 million in a failed attempt to convert rent-controlled apartments at New York City's Stuyvesant Town to high-end luxury housing. CalSTRS has made a risky investment of $42 million in the 8 Washington Street Project which is far from a sure thing. Sign the petition and ask the investment committee to reconsider these investments which jeopardize teachers' retirement benefits.
- Chair, Teachers' Retirement Investment Committee, CalSTRS
Harry M. Keiley
STOP CalSTRS Risky Real Estate Investments: A Ticking Time Bomb for CA Taxpayers
We strongly object to CalSTRS’ (California State Teachers Retirement System) current investment policies that allocate far too much of its portfolio to financially risky real estate deals such as the 8 Washington Waterfront High-Rise Project in San Francisco. We ask you to take this opportunity to stop throwing retired teachers’ good money after bad and reconsider CalSTRS risky $42 million gamble on the 8 Washington Project for the following reasons.
When it fails, retired teachers and taxpayers will have to cover the shortfall 1.
CalSTRS recently lost $100 million in a failed attempt to convert 11,250 middle class rent-controlled apartments at New York City’s Stuyvesant Town to high-end luxury housing.
CalSTRS is investing heavily in a proposed luxury condo project on San Francisco’s historic waterfront known as “8 Washington” that would require the first major height increase on the northern San Francisco waterfront in 50 years while destroying a decades-old active recreation center that serves middle class families.
CalSTRS originally committed $26.7 million for the 8 Washington project. By Sept. 2011, it had paid out the entire $26.7 million plus an additional 100K, a year before entitlement.
Last August, 8 Washington was halted for 15 months by a citywide coalition of concerned citizens that collected over 30,000 signatures in 30 days to place a voter referendum on the Nov. 2013 ballot that challenges the project’s height increase approval.
A poll conducted by David Binder Research found that SF voters are likely to reject the proposed increase in waterfront height limits for 8 Washington by a wide 30 point margin (56%-25%).
Strangely, CalSTRS responded to this major increase in risk factor by contributing another $4.3 million to the project for a total investment to nearly $42 million. CalSTRS is proceeding as if this project is a ‘sure thing’; its anything but.
Who at CalSTRS is overseeing these kinds of risky investments? When 8 Washington is voted down by San Francisco voters in November, who at CalSTRS will be held accountable?
Today, CalSTRS projected assets can only cover 69% of its expected costs over the next three decades. That represents a shortfall or “unfunded liability” of $64.5 billion. Knowing this, how can CalSTRS continue to invest in projects as risky and uncertain as 8 Washington?
CalSTRS: a State Agency in Need of Adult Supervision to Protect Teachers & Taxpayers
San Francisco, CA
1 For more on why these investments are so risky see “Pension Fund Asset Allocation and Liability Discount Rates: Camouflage and Reckless Risk Taking by U.S. Public Plans?” a very accessible academic paper written by Martijn Cremers, Yale University, and Aleksandar Andonov, and Rob Bauer, Maastricht University (May 2012).
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