SOLD – 301 Capitol Mall

301 Capitol Mall - Taken in 2010

After nearly 18 years and several attempts to develop the land, CalPERS has sold the former twin 53-story Tower on Capitol Mall site to the Shingle Springs Band of Miwok Indians. Located at 301 Capitol Mall, the property was sold for $17 million and the Miwok Indians have said they have not plans for the site. The 2.39 acre block is currently fenced off with over a thousand piles poking out of the ground where 615 foot tall towers would have gone. The site is also over grown with full size trees on the southern side facing Capitol Mall. Social media seems to be excited that a casino could someday be built there, not me.

For Sale - 301 Capitol Mall

The Sacramento Business Journal is reporting that the CalPERS owned block at 301 Capitol Mall is for sale. No price for the full city block has been given but Turton Commercial Real Estate says they have received more than a dozen inquires and confident offers will follow soon. CalPERS has owned the land since 2007 when they bought out John Saca during the unsuccessful development of two 53-story towers.

It's being marketed as the single best development site in the central city even though nothing has been built there after several high-rise office tower proposals. Turton Commercial believes “any project on the site would need to be at least 500,000 to 600,000 square feet”.

 Here's a link to the broker's flyer. https://files.constantcontact.com/17...c.pdf?rdr=true

55 Years of History at 301 Capitol Mall

The lengthy history of 301 Capitol Mall can be exhausting, but as of last Friday, CalPERS will now sell the property and cancel the proposed 33-story mixed-use high-rise. For the last 16 years, CalPERS has spent nearly $70 million buying and maintaining the property, and now after three failed attempts to build at the site, it will be sold. The city block now resembles a wildlife refuge where raccoons and other habitat are thriving.

55 years of history at 301 Capitol Mall

The block was once the headquarters for the Sacramento Union newspaper, in 1967 the paper purchased the Capitol Mall address and built the publications headquarters. By 1994 the Union printed its last paper and went out of business. In 2005 the Towers of Capitol Mall were approved for construction at the site and demolition was done in preparation for two 53-story high-rises. By 2007, the developer was struggling to finance the project and plans were scrapped. CalPERS bought into the project in hopes of saving the proposal, but market forces stopped further work at the site killing the proposal.

In 2016 CalPERS teamed up with CIM Group and proposed a 30-story mixed-use building, the odd stacking of the tower was not accepted well by the public and later canceled. By late 2019 another proposal was offered that was as CalPERS teamed up with the development form Hines. This proposal was to be Sacramento’s tallest if built at 33-stories and 557 feet tall. It was seen as a better design, but as 2020 took hold and the pandemic pushed people to do more work from home, it became apparent there was no interest in more office space downtown. Currently, the Sacramento office market is in its eight straight quarter occupancy losses, millions of square feet are available and it might take many years to lease them back up to pre-pandemic levels.

New Developer Chosen for 301 Capitol Mall

CalPERS has changed things up and hired a Houston-based developer Hines Real Estate to take over the 301 Capitol Mall project. According to The Wall Street Journal, an outside consultant expressed concern about the former developer CIM performance. CIM failed to deliver as much as $41 million in rebates that were negotiated as part of the nine-year-old agreement.

The article also mentions that, with interest rates low, major public pension plans are under heightened pressure to seek out investments that will yield enough to cover benefits promised to firefighters, police officers, teachers and other public workers. “We’re committed to fulfilling our fiduciary duty to find the best investment path forward for this very important project,” Ms. Frost said.

RCLCo, a real-estate consultant for Calpers, also outlined problems with CIM Group in a performance review prepared for Calpers, the people said. The memo, which isn’t public, said that CIM’s efforts at developing properties in Calpers’ portfolio were slow.

Separately, a Calpers spokesman said that about $41 million, a previously unreported figure, remains to be paid by CIM Group to Calpers on a total $50 million in fee rebates promised under a 2010 agreement.

After reading this article in WSJ, it appears CIM’s ouster was because of a lack of performance. If the economy softens, I wonder what Hines will do?  Will Hines scrap the current proposed tower and build something unique for Capitol Mall. We don’t need to see another uninspiring tower like this last one.

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.

Tower 301 CEQA & Draft EIR

Proposed Tower 301 on Capitol Mall, 557' tall and 31 floors

The Draft Environmental Impact Report (EIR) for the Tower 301 Project (P18-078) located at 301 Capitol Mall is available to view and comment. The Comment Period is from July 3, 2019 to August 19, 2019.

http://www.cityofsacramento.org/Community-Development/Planning/Environmental/Impact-Reports
 
If you read the Colliers Sacramento Market Q2 2019 Office Market Report Final, it says, “Market vacancy rate is now at a 17 year low. Downtown tenants in Class-A high-rise floors facing $3.50/SF rents or higher will seriously consider relocation options in Natomas or other nearby suburban submarkets to cut costs or find more efficient space. ”I would guess this will make it harder fill the proposed Tower 301 where rents are quite a bit higher than 3.50/SF.

In my opinion, its tall but underwhelming. The proposed tower does not give any since of place or add anything unique to Capitol Mall. I had hoped a beautiful building would be proposed at the foot of Capitol Mall, and this is not it. The proposal would not have to be tall, just unique and attractive like the Emerald Tower across the street. Have you seen some of the other dynamic high-rises cities are getting lately when developers spend $500 million or less? For some reason Sacramento just does not inspire architects. 

Tower 301 @ 301 Capitol Mall

Proposed Tower 301 mixed-use high-rise at 301 Capitol Mall, Sacramento CA

The Sacramento Business Journal reporting that CalPERS along with developer CIM are submitting plans for their 33-story mixed use tower for 301 Capitol Mall.  This means the developer is pursuing entitlements while also pushing a marking campaign to attract possible tenants. It’s noted in the article that the project would not be built unless an anchor tenant is found. Big projects like this traditionally need to lease 50% of the building before financing is released for construction, in this case 368,500 SF will need to be leased of the 737,000 SF proposed tower.

Proposed Tower 301 mixed-use high-rise
at 301 Capitol Mall, Sacramento CA

 

 

 

 

 

 

 

 

 

 

Developer CIM made some modifications from the previously released version; one hundred apartments that were originally on the top floors of the high-rise are now down at the second through fourth floors facing L Street to the north. The apartment would also be smaller in square footage and more affordable than is typical is such a project.

This proposal does not stand out to me. It is a tall vertical glass box with no distinguishing features. Yeah, it better than a hole in the ground or nothing, but I thought $550 million would create something more. It would not have to be tall, just unique and something that gives people a sense of place verses just another high-rise like the one we see here. Something tells me the market will flush this proposal out also, CalPERS has waited to long to get this going and the market will creator as we have seen before. How likely is it they will pre-lease over 350,000 SF?

Proposed Tower 301 mixed-use high-rise at 301 Capitol Mall, Sacramento CA

301 Capitol Mall Tower Divides CalPERS Board

Capitol Public Radio’s reporting that the CalPERS board has stalled the project because of internal disagreements. It appears three CalPERS board members have voted against the project citing a study that the return on investment would be to low.

No plans have been filed with the city and no major tenant has been secured, both are required for financing. Will CalPERS drop the ball again? This could be CalPERS way of backing out of the project without saying perspective tenants aren’t eager to lease space like CalPERS had hoped. For over two year the proposed Vanir Tower, a 26-story high-rise on J Street also could not find perspective tenants to secure financing.

550-Foot-Tall Tower Proposal

CalPERS & CIM Group latest proposed drawing
 for 301 Capitol Mall

The internet is already getting worked up into a frenzy about this new proposal for the former Towers site at 301 Capitol Mall. The SacBee’s reporting that this project would have 100 apartment and 737,000 square feet of office space in addition to some retail and an elevated public park. CalPERS has said they will commit $550 million to build a mixed-use tower along with CIM Group.

CalPERS & CIM Group latest proposed drawing for 301 Capitol Mall

If you read the Sacramento Bee article, they say in the second paragraph to not expect any new construction cranes coming soon because the developer still needs to find enough tenants to lease (at least 50%) the tower before starting construction. In addition, no timeline has been mentioned for construction, so there is still no certainty this will actually be built. Unlike the 2016 proposal, CalPERS has committed a financial investment to move this process forward, so that is a positive.

I do prefer this proposal to the previous one in 2016, but it seems to be lacking something. The absence of other materials other than blue glass is underwhelming.

301 Capitol Mall Tower Proposal

A few words I have read to describe the proposed CIM/CalPRES 30-story tower at 3^rd & Capitol Mall… boring, gross, fugly, and not attractive at all. I have also read positive comments but they seem to be in the minority. I think its design is mundane which is typical with the state influence. Thankfully these are only conceptual drawings. CIM has said that no tenants have signed on, no price tag has been given and no permits or entitlements have been started. This is all an effort to get free publicly, something they have done nearly every year for the last several years but this time they have pretty pictures.

Proposed tower at 301 Capitol Mall by CIM/CalPERS looking west

Maybe this was a rushed effort to show me that there was a proposal in response to my post about it a few weeks ago? Probably not J Even though nothing thus far shows this will even happen, the developer has said it could break ground as early as 2018.

CIM plans for the site include a single 420-foot tower, 1.1 million square feet of space in the structure with 550,000 square feet of total office space, 100 apartment on the upper most floors and creative space and retail on the lower floors. It appears to be built to accommodate the states requirement of large open floor plates. Several weeks ago the Board of Equalization hinted it might relocate to this tower from its current headquarter on N Street, since then they have said they now prefer to move to low and mid-rise buildings instead of a tower. 

Proposed tower at 301 Capitol Mall by CIM/CalPERS looking east

This proposal like the Vanir Tower on J Street are still in the very early stages of development. This proposal will now be competing for tenants against the Vanir Tower to pre-lease. Banks under State/Federal law require that before monies can be lent to build an office building, 50% needs to be pre-leased. Vanir Tower needs to line up about 200,000SF and this tower needs 400,000SF. Occasionally developers will spend their own money to build high-rises like 500 Capitol Mall did and no pre-leasing is required. The Vanir Tower has not started the entitlement process or applied for any permits with the city. This indicates to me that after proposing the tower 15 months ago they have not pre-leased the minimum square footage to move forward. All these proposals emerging right now seem eerily similar to what Sacramento experienced in 2007 before the market collapsed and all but a few were built.

This proposal is far less appealing than I hoped for, but it not usual when the states involved. This site is at the foot of our city's grand entrance as you cross the Tower Bridge on Capitol Mall and deserved something much, much more that this current trendy design which is more awkward than anything else.

Current condition of the proposed CIM/CalPERS tower site

Sources: Sactown Magazine & SacBee

There's No Proposal

As if this was real news, the Sacramento Bee is teasing the idea that the former site of two 53-story towers at Third Street and Capitol Mall could be the site of a mixed-use tower. The state Board of Equalization has meet with CIM Group who manages the site for CalPERS about relocating to a new tower that could be built at the Third & Capitol site. CIM officials showed conceptual drawings of a mixed-use project to BOE that would include condominium units on the upper floors, office space in the middle and retail on the ground floor. The preliminary plans call for a tower in the 20- to 30-story range.

The Bee then goes on to report that for this deal to work for BOE, the BOE wants the developer of the new site to assume the bond debt on the agency’s current headquarters, debt to ease the burden on the state. The debt would probably total around $20 million or $30 million by the time the Capitol Mall tower gets built and the agency is ready to move.

Therefore, this whole discussion seems crazy be begin with. How can the CIM Group stay in business if they are taking on other people’s debt? It’s safe to say unless the State gives CIM something really unique that has value in return for the debt. this deal won’t go anywhere. I have been in contact with CalPERS for 8 years, and their plans for the site have not changed. Their biggest problem is they can’t find long-term tenants for the proposal to make it feasible. If BOC wants to try another proposed tower in downtown, they should call the Vanir Tower Group who has been teasing that they could build their tower taller because of unexpected interest, but no paper work has been filled with the Planning Dept. to show this is true. 

301 Capitol Mall Six Years Later

 

301 Capitol Mall former Towers site

It’s hard to believe how much has not changed at the former Towers site… it's been six years today since the job to construct two 53-story residential towers at Third Street and Capitol Mall was halted. Even if the two 600-foot towers estimated to cost $750 million project had been built, with the regions record home foreclosure rate over the last 4 years, today I imagine it would sit more than half empty like the L Street Lofts which only sold 22 of the 92-units. My contact at CalPERS says there are no plans to develop the site in the near future.

Just think, if 17 more condominiums would have sold to reach the bank requirement of 400 units, money from CalPERS and Deutsche Bank would have continued to invest in the project.