CalPERS has ended its partnership with CIM to build Sacramento
tallest high-rise. According to Chief Investment Officer, it is unclear if
CalPERS still plans to build the office tower. Last year, the CalPERS
investment committee approved the new $550 million project by a 10-3 vote.
Three investment committee members raised concerns about the 34-story building
following a negative opinion on the project from a CalPERS hired real estate
consultant. In approving the
project, the CalPERS investment committee and investment staff agreed that they
would not proceed if the building was not at least 40% pre-leased and CalPERS
was guaranteed a return of at least 5.8%.
301 Capitol Mall has seen three proposals for the site since
2005. The first was the twin 53-story condo/hotel that had millions of dollars
in cost over runs. CalPERS stopped the funding of the project in 2007 losing an
estimated $60 million dollars. Then in 2016 CalPERS with developer CIM Group proposed
a poorly designed mixed-use high-rise which looked like three separated
building stacked on top of each other. This design was shelved after much blow
back from the public.
From what I understand, the asking rate for the proposed
tower was $3.75psf, which is quite a bit higher than the average Class A office
rate in downtown of $3.19psf but as high as $3.50psf at certain properties. The
cost of construction materials have continued to rise and rise, so for a
high-rise to be built in Sacramento by the private sector, the asking rate
needs to be $3.75psf to make the project profitable.
So here we are again, another economic cycle and nothing
will become of the vacant lot at 301 Capitol Mall. Whatever they do in the
future, the proposal should give a since of place adding something unique to
Capitol Mall. Let’s hope a beautiful building will be proposed, the proposal
would not have to be tall, just unique and attractive like the Emerald Tower
across the street.
For now, the vacant lot known as the “the hole in the ground” will continue to house the urban wildlife population. Just last weekend I saw three Raccoons cross Capitol Mall and go under the fence that surrounds the property.
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