Who Owns Sacramento?

Sacramento is on the radar of the world’s investment community. With Properties selling for $600 to over $1,000 a square foot in top tier markets like San Francisco, Sacramento’s class A office properties selling for $250 to $425 a foot seem like a pretty good value. In the last 5 years, several of Sacramento’s CBD office buildings have sold. Most recently, 400 Capitol Mall sold to Starwood for about $340 per square foot. Some other notable buildings in Sacramento’s CBD that are owned by out of town entities include:

  • 980 9th Street (Park Tower) Bought by Hines in 2017 for about $220 a foot.  This building is probably worth $300 a foot today particularly when you consider the great parking capacity and Class A quality.
  • 300 Capitol Mall, aka the Emerald Tower is owned by Sterling Investments out of New York. Home to the Department of Insurance and the State Controller. The Asset manager is Hines.
  • The Senator Hotel office building, located across the Street from the State Capitol was acquired in 2015 by Swift out of San Francisco for $198 a foot. When they bought the building it was about 40% vacant. Currently the building is about 8% vacant.
  • 621 Capitol Mall, aka The US Bank Tower, was Developed by David Taylor Enterprises and the Lewis Trust out of the UK. The Property sits on a City block across the Street from the Golden 1 Arena. In January 2018, Shorenstein bought the building for over $420 per square foot.  This purchase doesn’t include the half block next to this building that could be developed into a hotel, office building or how about Condos like the ones planned 10 years ago?
  • 501 J Street was bought by Kaiser and the 200,000 s.f. building is going through a considerable (complete) renovation. Kaiser will be occupying the building by the end of 2017.
  • 1325 J Street is owned by Princeton Holdings out of New York. The 2014 acquisition was part of a 5 property portfolio and 1325 J was valued at approximately $305 per square foot.
  • 801 K Street sold to GPT Property Trust out of Maryland for about $235 a foot in early 2016. The Renaissance Tower sits on a multi-level parking structure just 2 blocks from the east entrance of the Golden 1 Arena or DOCO (Downtown Commons).
  • 770 L Street was picked up in August 2013 for about $178 per square foot by AMP Capital out of Australia. Shortly after acquisition the State of Ca leased up about 25,000 s.f. Then shortly thereafter, the Golden One Arena was announced, located just just two blocks from 770 L Street. College Hoops commentator Dick Vitale exclaimed, “Serendipity Baby!” Rumor has it the building is in contract with an institutional buyer.
  • 915 L Street is owned by Government Properties Trust located in Massachusetts. Predominately occupied by the State of California (Finance).
  • 925 L Street San Francisco based Soma-Capital Partners bought 925 L Street in November 2017 for $278 a foot.  Home to the Legislative Counsel.

While we haven’t seen a lot of capitol flowing in from China or other international investment circles, it shouldn’t be too long before we see the international capitol flow quicken and surge. For additional commentary on Sacramento’s CBD, check out the article here: It’s Just a Matter of Time .

Sacramento’s CORE: Par, Birdie, Eagle. Albatross next?

Sacramento’s Core (Midtown and Downtown) is not very sneaky. In fact the whole world has taken notice.  One thing I didn’t now about Core is this:  Core recently took up golf, and in 2015 made the PGA Tour.    In a matter of months, Core has risen to the top of the money list!  At the  2016 Player’s Championship, Core was interviewed after a remarkable 3rd Round, and he shed some light on his success.

Reporter:  So Core, how do you feel about your round today?

Core:  Well, I gotta tell you, I don’t think I can hit the ball much better.  The first day, I played alright, but I was still working out the kinks, you know, past few years have been tough.

Reporter:  I noticed that.  Your first round you scraped it around and managed to keep yourself in the hunt.  But then you really turned it on.  What do you attribute to your resiliency and significant bounce back?

Core:  Well before I picked up my new coach….

Reporter:  Your new coach?

Core:  You know, they call him (pause) The Golden One.  (smiling) I call him GO.

Reporter:  How could I forget?  He has been a big part of your rise to the top of the money list, huh?

Core:  No doubt.  I was making progress with my trainer, HDR, and my previous coach, Trend..  But when GO showed up, things really started to click.

Reporter: So what do you see for the final round tomorrow?

Core:  I can’t imagine going as low as I did today, heck, I only had 16 putts.  But I feel pretty good. I am looking forward to solid final round.

Reporter:  Thanks, Core.  Good Luck Tomorrow!

With the exception of some notable deals, like the sale of the Wells Fargo Center, it doesn’t take a brain surgeon to note that values are up in Midtown and Downtown.  In looking at the statistics (Costar) for 2014 through 2016 here are the basics:

Commercial (non residential) properties sold for an average of $99 a square foot in 2014, $151 in 2015, and in 2016 the average price per square foot increased to $205 a foot.

Multifamily properties sold for an average of $95,000 per unit in 2014 with a GRM of 10.92. In 2015 the price per units edged up to $116,000 per unit with the GRM jumping to 13.15. In 2016 the Price per unit increased to $150,000 per unit with a GRM of 13.32.

Land sold for an average of $94 per square foot in 2014. In 2016 the average increased to $131 per square foot.


The Ransahoff (11th & K)

This survey is only for properties selling between $1,000,000 to $10,000,000.  The price increases are not surprising given the development of the arena and the trend of people wanting to live in the Midtown and Downtown area.  However, I think you can say that a 50% increase in the price of Multifamily (price per unit) from 2015 to 2016 is more of a spike than a bump.  Notable: the Gross Rent Multiplier (GRM)increased nominally between 2015 and 2016.  This means rents escalated significantly in 2016, nearly in step with the values.

Many of the commercial properties sold (non-residential) in the midtown area were to users.  For quality properties with parking, the prices exceeded the median significantly.

Land sales have picked up considerably as well, and values are up at least 5o% from 2014.


R Street’s Ice Blocks

For detailed Sales and leasing information including sales comps for 2016,  contact Tom Bacon at 916-761-1202 or tbacon@kiddermathews.com.

The Senator will Rise Again

It looks like the iconic Senator Office Building is about to change hands.  The building consists of about 160,000 square feet on 10 floors, and has historically been a popular location for lobbyists and associations since it is directly across the street from the Capitol.

In 2010 CALHFA vacated the building to move into a shiny new space at 500 Capitol Mall.  When CALHFA moved out they left behind a significant vacancy, say about 50,000 square feet.  Up until CALHFA’s move, the building never had a vacancy over 5%; in fact, 5% would be considered high.

Currently there is about 50,000 square feet available about (30% vacancy) with spaces ranging from 500 to 15,000 square feet.  With new ownership this vacancy should lease up fast.

If you are a tenant looking for about 5,000 square feet near the Capitol, your choices are slim.  Class A space in the Capitol Close Micro market (excluding the Senator and 1130 K Street) is hovering under 7%.  So, once the leasing program gets going at the Senator, we should see the Senator’s vacancy back to where it should be.