One of California’s largest city pension funds is not only paying a “big” sum for its huge, high-end office space—it’s also locked into a long lease.
An investigation by a ABC10 found that the San Diego City Employees’ Retirement System is locked into a 10 year lease for the office space it rents, and the System will pay over $10 million in rent over that period. From ABC10:
The San Diego City Employees’ Retirement System manages a $7 billion fund. A review of office leases by Team 10 found SDCERS will spend $10.1 million renting office space at 401 West A Street in downtown San Diego. The lease is for 26,000 square feet over 10 years, and an SDCERS spokeswoman said 58 employees use the space — which breaks down to roughly 450 square feet per employee.
“I have to wonder why more than 20,000 square feet. Forget whether you own or lease it. Why that big a space?” real estate appraiser and San Diego State University lecturer Dana Kahn asked after reviewing the SDCERS lease.
Those numbers fall roughly in line with what SDCERS has reported publicly for years; according to its latest financial report, the System spent $998,000 on rent in 2013.
The investigation also looked into office space rented by the California Public Employees Retirement System.
CalPERS—the nation’s largest public fund—has eight offices around the state, although its staff is much larger than that of SDCERS.
CalPERS is a bit more secretive about its rental costs, as its financial reports don’t specifically disclose the cost of rent for its offices.
Its latest financial report does disclose that the System pays $3,789,000 for “facilities operations”, which may include rent as well as utility costs associated with its office spaces.
ABC10 managed to get a hold of SDCERS’ spokesperson over email, and she answered a few questions.
1. Why did SDCERS choose to rent office space?
SDCERS has been renting office space for many years. We’ve been in the current locating for the past seven, and then rented space in other downtown office building locations for many years before that.
2. Did SDCERS considering buying space?
No. The only investments in real estate done by SDCERS are as part of the fund’s real estate holdings in our investments portfolio.
3. How many employees work in the office?
There are 58 budgeted staff positions at SDCERS.
4. How much of SDCERS portfolio consists of real estate?
Real estate holdings in our investments portfolio account for 9.1 percent of the fund, or approximately $630 million.
5. Who negotiated the lease?
The original lease for SDCERS’ space at 401 West A Street was signed in April 2007. Signing for SDCERS were its then CEO and Board President. SDCERS was assisted in finding space by broker Irving Hughes. The first amendment to the current lease was signed in October 2013, again by its current CEO and Board President. SDCERS was assisted in negotiating the amendment by broker Hughes Marino.
Photo by Justin Brown via Flickr CC License