The Chicago Teachers Pension Fund (CTPF) is paying a whopping $116,000 each month to rent its offices in the heart of the city’s financial district.
“That's a huge rent,” said former Trustee Phil Weiss.
Weiss knows real estate. Before he became the CTPF Investment Chair, he got elected based on his resume that included making a lot of money in real estate.
Weiss noted that this exorbitant rent the Pension Fund pays comes at a time when commercial real estate values have plummeted. Sterling Bay’s investors have fled as more businesses work remotely and forgo paying exorbitant rents.
According to the CTPF Budget for Administrative Costs, tenant rent and services from June 1 to June 30, 2023 was $116,535.22. The CTPF rent (listed as operating expenses and tenant services) from August 1, 2018 to August 31, 2018 was $91,123.
That’s a $25,412 increase!
The CTPF Communications Director Michelle Holleman told Second City Teachers that the monthly rent in 2018 was $55k - $55,146 for rent, $37,578 for operating costs and $3,564 for tenant services for a monthly total of $96,289.08. The June 2023 bill of $116,535.22 was also broken down into $63,653 in rent, $27,466 in operating expenses, $25,092 in real estate tax, and $322 HVAC.
CTPF’s monthly rent for Fiscal year 2024 (current) is about $65,100 per month. In August 2018 (Fiscal year 2019) monthly rent was about $55,745.
“The Fund’s office lease provides that the lessee pay basic rent, tenant proportionate share of taxes, additional rent, storage space rent and all other sums that tenant (may) owe to landlord or required under the lease,” Holleman wrote in an email. “Under commercial lease schedules it is normal for rent to increase over time taking into account the tenants proportionate share of taxes and operating expenses for the property.”
In 2018 the Pension Trustees had voted in favor of moving its old offices to its current location next to the Chicago Board of Trade because then Director Charles Burbridge said they needed bigger offices, it would save money and they planned to do live streaming of board meetings.
The CTPF Board meetings are still not currently live streamed.
The 2018 motion to move to their current location was made by Retired Trustee Mary Sharon Reilly and seconded by Teacher Trustee Jeffery Blackwell to enter into office negotiations at 425 S. Financial Place and approved 7-2, according to the minutes. The two no votes were Retired Trustee Maria J. Rodriguez and Former Teacher Tina Padilla.
CTPF stated that they would save an estimated 14 percent per year compared to the current location at the time, or $3.8 million over 15 years. They also lauded the new offices because it was close to public transportation, fully handicapped accessible, and had enhanced boardroom audio and video capabilities to make Open Meetings more accessible.
CTPF had leased the 26th floor at 203 North LaSalle Street from 2005, until its lease expired in 2021. The Fund then moved to 425 S. Financial Place in Dec. 2019 after signing a lease in Feb. 2019.
Teachers and retirees say parking was convenient at the LaSalle Street offices. Pension Fund employees and visitors could drive straight into the building to park, and just use the elevator to go up to the 26th floor.
But people complain that they now have to park further away and walk in an area that is considered a bit sketchy. A pawn shop lurks just around the corner despite being located in the ‘financial district.’
“It's scary, there are lots of vagrants around, it’s very dark, and it’s difficult to get up and down the stairs, especially for the older retired teachers getting pensions,” said one insider who wished to remain anonymous.
At the January 19, 2023 CTPF Board of Trustees Meeting Teacher Trustee Quentin Washington made the motion that was seconded by Retired Teacher Trustee Mary Sharon Reilly to approve a real estate broker to consult regarding alternative office space. According to the CTPF Minutes, Lupe Garcia, senior legal counsel, reported that the CTPF Contract and Administration Procurement Policy (CAPP) waives competitive bidding for a “provider of professional services, such as a real estate broker or appraiser” and allows for the selection of a real estate broker “on the basis of demonstrated competence and qualifications, and a fair and reasonable price.” The Director, the attorney and the admin team reviewed three proposals from CBRE, CRES, and Transwestern and recommended the Trustees support their recommendation to hire Transwestern.
CTPF Executive Director Carlton Lenoir stated that the Strategic Plan presented to the Board contained an objective to search for a “cost effective, secure and accessible office space that supports our mission, members and the work of the Board of Trustees.” He said Transwestern will provide an analysis of the commercial real estate market accounting for the evolving work conditions driven by the pandemic and other factors to identify new property to lease or purchase, and find a sublease for the current property.
A comprehensive analysis was undertaken by Transwestern that included the marketing of the current CTPF property on the commercial market, Holleman said.
But that would mean taking on two big rents if you don’t find someone to sublease the property. This brought back bad memories for former Teacher Trustee Phil Weiss who recalled when the CTU was paying twice - the remaining years on a million-dollar lease at the Merchandise Mart coupled with the costs of their new headquarters that they had just purchased. They sold the Fewkes Tower in 2015 for almost $50 million and used the money to finance their new headquarters and political power.
“There was discussion,” Weiss said. “It was brought up, but didn't go anywhere. I know the CTU got screwed with two rents and commercial real estate is a disaster now. There are lots of real estate companies that want funding. It is tough to find renters now.”
Weiss said he suggested that CTPF rent space in one of the closed schools on the Southside.
“There were lots of empty schools with ample parking,” he said. “There were schools with low enrollment and free parking and some that had relocated. We could go in there and have pension board meetings.”
At the January, 2023 Board Meeting, Former Retired Teachers Association of Chicago (RTAC) President Pat Kubistal (who recently passed away) requested an explanation on the cost saving analysis when the office is relocated.
The Chicago Teachers Pension Fund is only 47 percent funded and the Chicago Teachers Union states they need more revenue to keep the 130 year old Pension Fund solvent and fix the Tier 2 problem where CTU teachers hired after 2011 get a far diminished pension.
Annual lease payments from 2018 through June 30, 2023:
Fiscal Year
2018 $640,177
2019 $653,52
2020 $683,335 (Move to 425 SFP)
2021 $725,951
2022 $744,092
2023 $762,551
You would think the pension fund would want to lease from a minority in a underserved area instead of hobnobbing with the upper middle class downtown.