301 Capitol Mall Future Unclear

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.