McKinley Village

McKinley Village

Site grading is still on track to begin within the next few weeks with the first homes to be built next year. With a total of 336 homes and an investment of nearly $135 million, this project will turn what has been an orchard and grassy area into suburban style development in the central city.  http://mckinleyvillage.com/faq.html

By contrast, the Centrage project proposed in the late 1980’s planned over 1 million square feet of high-density office, commercial, and residential uses, including 19 story office towers, a 20 story hotel, and 1,000 residential units costing $350 million. I think Sacramento once again missed an opportunity when this was rejected by the City Council shortly after the city’s Planning Commission voted 6-3 to support the project as well as the environmental community.

Centrage Project proposed for the current McKinley Village site in 1988

Capitol View Protection

Sacramento, CA - Capitol View Protection

Sometimes it’s good to review a little Sacramento history so as to better understand why the skyline seems to be mediocre at best. Although many proposed towers were never built because of economic conditions, many other high-rise proposals were limited in scale and canceled due to elected officials imposing height restrictions more than a year after developers started getting entitlements for their projects.

Back in 1991, both Mayor Anne Rudin and Sacramento Assemblyman Lloyd Connelly pursued an ordinance to limit height and protect the Capitol. At the time the City imposed the restrictions known as the Capitol View Protection, it ended up wiping out a total of three high-rise proposals, one by developer Giannoni at 14th & L Street at 19 stories and another by Benvenuti at 15th and K Street to be 14 stories, and the Hallmark Tower at 502’. The new law at the time limited all building to ten stories or 135’. All three buildings would have been too tall and blocked the Capitol view. At the time, councilmember’s said “they were committed to smaller buildings around the perimeter of the entire park” which discouraged the developers who started getting entitlements for their projects a year prior to the new law. All three towers were canceled out of frustration and uncertainty as to what the City might do to further scale down their projects.

The R Street Corridor also suffered a similar fate in the late 1980’s killing six high-rise proposals. 

Exceptional Opportunity

1118 - 1128 7th Street, Sacramento, Ca 95814

Ladies and Gentlemen, do I hear $3.5 million dollars, now $3.5 million, now $3.5, will you give me $3.6 million? Don’t worry about how much you’re spending, the cashier is keeping track for you. This site at 1118 - 1128 7th Street adjacent to the arena projects is up for sale for a yet to be announced price. My inquires with the listing agency have not been returned so I'm guessing here. In 2005, 1128 7th Street sold for $3 million, so selling both 1118 and 1128 together next to the new arena should fetch a nice figure.

How could any investor not jump on this opportunity?

Going once, going twice, sold?

1118 - 1128 7th Street, Sacramento, CA 95814 - Potential future hotel,
residential or mixed-use site 

Capitol Square Lemon

Capitol Square - 450 N Street, Sacramento, CA 95814

If there was ever a reason to demolish a high-rise in downtown, Capitol Square can certainly make the case. After being constructed only 21 years ago, $70 million has already been spent to repair all its ongoing mold growth, falling windows and other serious problems that have plagued the building. This 24 story tower was originally built by CalPERS in 1993 for $79 million, so spending nearly that much to fix its ongoing problems should be recognized as a reason to tear it down.  

The state bought Capitol Square from CalPERS who originally financed the high-rise in 2006 with the Board of Equalization occupying the entire tower with around 2000 employees. The sick building started showing signs of trouble back in 1998 with water infiltration. Costs to make repairs are now over $70 million and an additional $159 million could be spent over the next few years.

Currently moving through the State legislature, Assembly Bill 1656 would authorize the state to move forward with a site selection for the new headquarters, but the appropriation would need to be revisited by the Legislature and would not be made until the 2015-16 or 2016-17 fiscal year. In addition, it looks like nothing will change for Board of Equalization for at least 4 or 5 years while the scope of work is developed and construction documents, with repairs to the wastewater and decorative glass expected to take about three years to complete.

Whether or not the state decides to relocate the employees, it still must pay for the property’s bond debt service through 2021. The cost of that debt is currently $77 million.

Just last week a $50 million claim hit BOE over mold-related illness. On a good note... oh wait, there are none.

Township Nine

Residents at Cannery Place Apartments will move in this September.

View down 7th Street.

Looking south from the levee.

The Township 9 project is a mixed-use development in the Richards Boulevard Redevelopment Area. 2,500 housing units are planned in addition to 840,000 square feet of office space, and 145,000 square feet of urban retail. Residents at Cannery Place Apartments will move in this September! Township Nine is a 65-acre mixed-use development  costing around 2 billion dollars and take approximately 10 years to complete.

https://www.facebook.com/TownshipNine

http://www.t9ontheriver.com/

 

i15 Complex

i15, a mixed-use project of eight stories at 1431 I St.,

D&S Development is planning to construct the i15 complex at the corner of 15th & I streets, at the site of a former auto repair shop. The 80-unit building will include rooftop terrace with views of the downtown skyline and two floors of penthouse-style, multi-level units. The ground floor of the building is slated to include about 3,400 square feet of retail. The i15 project still in early stage.

Lofty Proposals

Sacramento Skyline

I'd like to say that downtown development is on the rise, proposals emerging every other week for high-rise housing and other wise anticipating that the market will continue to improve. Some believe this is all due to the arena being built on K Street while others see the overall market coming back and the economy will prosper for years to come.

Over the years, a trend I have keep my eye on during several economic cycles is how downtown Sacramento is always late getting major projects started before the economic cycle busts. Many big projects never getting past the proposal stage. While many cities had projects rising out of the ground, Sacramento’s proposals were still on the drawing board when the market started to tank. In the last three economic cycles, Sacramento seemed to be 1 ½ years behind getting projects started before the economy dipped into recession compared to other cities. While most other cities reaped the benefits of getting out of the gates early with their projects while the economy was good, Sacramento was still on the sidelines.

 The 2008 recession left eight sizeable projects on the drawing boards and many small projects. A few of the large were Metropolitan, Aura, Epic, Capitol Grand, St. Anton, Towers on Capitol Mall, 700i, and the second Capitol Towers proposal.  The 1990 recession left even more high-rise proposals on the drawing board than I listed above including the first Capitol Towers proposal.

If the current (sluggish) economic cycle softens even more and the Fed continues to reins in its monthly QE3 printing of money, and other factors, it’s likely that many of the current proposals won't move beyond the drawing board. The first quarter of this year saw GDP shrink by -2.9%. It’s anticipated that the Feds will raise interest rates in the First Quarter of 2015. It’s fun to cheer these proposals through the process, but I’m highly cautious as to how many proposals will break ground only because of where we are in the current economic cycle.

If Sacramento sees half the current proposals completed, I would count that as an enormous success. I’m glad to see the arena being built downtown, but I’m highly skeptical about the city’s financing numbers and why they still don’t want to talk about it… like when the bond payment rate nearly doubles in a few years.

Regarding 301 Capitol Mall, my contact within CalPERS say we should not expect to see a proposal for the site for at least 12 to 16 months because of uncertainty about the economy. If the latest press release from a few months ago draws enough positive attention, we might see combination of sectors in the proposal that include office, residential, retail or hospitality.