Looking for a Square Deal

Once the site of Sacramento’s most ambitious building project, 301 Capitol Mall may be in play again. But will it rise to the occasion? Here’s why CalPERS holds the future of our grandest boulevard in its hands.

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And now, with the economy on the upswing and developers promising a new arena and retail district, downtown real estate is heating up again and it remains to be seen if the community-minded CalPERS of 2007 will step up to the plate, or if the purely business-minded CalPERS of 2010 will.

While it’s true that CalPERS is not a developer, it has invested heavily in retail and residential real estate projects throughout the world, from Chicago to New York and even Moscow.

But one place it has not invested heavily, especially in new projects—outside of its headquarters and a widely derided office tower at 450 N Street (whose windows used to pop out)—is here in Sacramento, home to the Capitol and more state workers than any other place in California.

While CalPERS certainly has a fiduciary responsibility to invest wisely for the benefit of its members, it should also assume some responsibility for investing in the downtown of the one city where so many of its members live and work. And while many of its members may live in the suburbs, investing in a city’s urban core pays dividends throughout the region. Signature downtown projects create ripple effects by attracting companies and people to the region, regardless of where they end up living or working.

To its credit, in addition to the $100 million it had earmarked for Saca’s project, CalPERS had planned to invest millions in housing on Del Paso Boulevard and the R Street Corridor, giving each of these on-the-cusp neighborhoods just the kind of jump-start they needed. But the economy stalled, and most of those projects were never built.

And CalPERS’ recent decision to consider a courthouse for Capitol Mall now calls into question its pre-recession dedication to improving the capital’s urban core.
CalPERS and CIM Group should recommit to their 2007 promises of a transformative project on the 301 Capitol Mall site, and make plans for a mixed-use high-rise that will complement the new arena and Downtown Plaza projects.

But even if they do, there’s reason to be concerned. Because the state isn’t required to hew to city design guidelines, Sacramento has been saddled with some urban design nightmares like the uninspiring CalPERS-funded 24-story 450 N Street tower and the state’s massive complex at the eastern edge of Capitol Park. In both cases, the state largely ignored pleas from city officials to make the projects more attractive. Instead, the state created dark-windowed monolithic structures that run counter to every modern urban design principle in the book.

But there is also some reason for hope.

CalPERS has some cash to spend these days. After taking a beating during the recession, its fortunes are rising, logging an annual return of 13.3 percent in 2012—its highest since 2006—with its portfolio reaching $258 billion as of June 30. In the past year, it has invested $500 million in a Chicago mall, $530 million in Asian real estate funds, $250 million in a Moscow mall, and $400 million in luxury New York apartments. But the critical property three blocks from its own headquarters remains a desolate civic scar.

In January, CalPERS chief investment officer Joseph Dear told Fox Business that among its real estate goals is to invest in “central business districts.” And one of CalPERS’ real estate investment partners recently named Sacramento as one of the urban areas it’s looking at.

In CalPERS, Sacramento ostensibly has one of the most powerful real estate investment allies in the world. It did, after all, take a risk on what would have been a massive catalyst project for downtown. And it did commit millions to residential units before the economy went belly-up.

So while we can’t expect the investment gurus at CalPERS to be savvy urban designers, we can expect them—as citizens of this city and this state—to be good neighbors, and to realize that investing in a transformative civic project in Sacramento will pay dividends that can’t be measured on a balance sheet alone. S