Sacramento Proposal/Approval/Construction Thread - III

[Ghost of Econgrad]

Originally Posted by wburg

Or, they could make the building a few stories taller, and put it in the same building.

I'm with you on that. As snfenoc pointed out, the Capitol View Protection height limit of 300 theoretically could be an issue. Hey, if they can combine the parking in the same building, I am always for that. I was merely stating the central city is still in it's infancy (IMHO) and that a parking structure is not that big of a deal. I am more concerned with housing, housing and more housing.

Side Note: Sorry you got sick from that house in Rocklin Wburg. I would totally live in a house like that than in an expensive condo in midtown myself. I love the differences of opinions on here! The palm trees would have to go. Yuck!

[Majin]

Originally Posted by Ghost of Econgrad

I would totally live in a house like that than in an expensive condo in midtown myself.

I would expect nothing less from you

[tronblue]

Wait a sec...Econ you hate palm trees? The embodiment of wasted natural resources, the graceful and most pointless palm tree? Its good to find common ground.

[wburg]

Unless I am misreading it, the height limit for the north half of the K/L block at 8th is 350 feet.

http://www.qcode.us/codes/sacramento/view.php?topic=17-v-17_96-17_96_100&frames=on


The Bel-Vue is in a lot better shape than the Maydestone; it was occupied by residents until the city took it over and kicked everyone out, the Maydestone was vacated because of a fire and its interior is severely damaged.

Here's an idea...the Citizen is doing pretty bang-up business as a boutique hotel in a historic building (which, by the way, does not have an integrated parking structure--they park at the 10th & L lot.) Why not turn the Bel-Vue apartments into boutique hotel rooms, and move the parking into the main building?

[snfenoc]

The diagram is a very poor copy. Read the text (which is like reading stereo instructions):

4. Three Hundred Feet. The applicable height limit shall be three hundred (300) feet for property located within the following areas:

a. The half block to the south of K Street, between 16th Street on the east and 12th Street on the west;

b. The half block to the south of K Street, between 10th Street on the east and 8th Street on the west; and

c. The half block east of 8th Street, between a line parallel to and two hundred ten (210) feet to the north of L Street on the north and N Street on the south.

We are talking about the empty hole on 8th and K right?

[Phillip]

South Korea-based Consus Asset Management has pledged to invest more than $91 million to build the 409-room, 25-floor hotel at 8th and K streets and a six-story parking garage at 8th and L, says lead developer Bob Leach.

He says the $136 million hotel project will increase the city's ability to host major conventions, spur business at Downtown Plaza and lead to store openings on the long-troubled K Street Mall.

Has anyone heard of Consus Asset Management? I can't find anything about them on Google.

The article says negotiations took place in Korea. Has anyone from Consus Asset Management visited Sacramento? Walked on the K Street Mall? Researched the current state of Sacramento's hotel market?

If this hotel will cost $136 million and Consus invests $91 million where does the other $45 million come from?

Why would Korean investors build a new highrise hotel in one of the weakest hotel markets in California when they can buy foreclosed trophy hotels in stronger markets for less than construction costs?

Yes, I'm skeptical.

[snfenoc]

Phillip:

I did find some mention of Consus on Google. According to the info I found, Consus is a South Korean asset management group founded only about 5 years ago. They may be an offshoot of or associated with an aggressive public employee investment fund. The info is sketchy though.

It does seem odd that they haven't come out here to at least check out the site and its surroundings. But maybe that's normal. Maybe face to face meetings are enough.

The developer will probably have to find an equity partner unless he has deep pockets - how about CalPERS? (j/k) That's gonna be hard. I don't know, can you get $40 million in stimulus money for a hotel?

Is Sacramento the weakest hotel market in California? According to the article, Consus seems to think we'll recover faster than other markets. Maybe that's why they are willing to invest.

I know, my answers are pretty weak. I'm with you. The more I think about it, the more I wonder what kind of idiot would give Sacramento (of all places) $90 million to build anything?

It's the surprising nature of the investment that has me thinking, 'Raze the Bel-Vue. — like this doesn't happen every day.'

[wburg]

phillip: You're right, it is in the 300 foot height limit.

Some other new news: There was also a Mitigated Negative Declaration (MND) released for ANOTHER hotel project (15 stories high, 180 rooms) proposed for the southwestern corner of 10th and K (most recently the home of a Washington Mutual bank, I think.) An MND is basically a statement explaining why a site is below the threshold needed for an EIR, which means that such a project could get going a lot faster (no need for completion of an EIR, public review, etcetera.)

I spoke with a city employee yesterday, she claimed that funding for the 8th & K project had not been secured, but they had an ERN (exclusive right to negotiate) with USA Hospitality. The ERN expired last month but they got a 45-day extension.

[travis bickle]

Why would Korean investors build a new highrise hotel in one of the weakest hotel markets in California when they can buy foreclosed trophy hotels in stronger markets for less than construction costs?

Phillip, you have hit the nail on the head. This makes little sense. It's more than just hotels too. Across almost every building sector (particularly high-rise), this precise equation is being worked out and new construction is found to be lacking. It's one reason why I'd be surprised if "Lot X" got started anytime soon. And given current trends (particularly govt policies and their effects on credit markets), this situation isn't going to get better for awhile.

Most strong development firms left (and I am very familiar with one) are looking for troubled properties to purchase at bargain basement prices now, not sites to develop (at least not in the near term). Certainly nothing you're going to have to carry on your books for a few revenue-less years.

If this Korean firm has money in the bank as claimed, investing $100 mil plus of it into a hotel on K Street seems ill-advised given the other opportunities out there.

The W Hotel in San Diego can't cover their payments and is going belly-up. If you had that kind of cash, which has the greater potential - an existing luxury property a couple blocks from San Diego Bay... or a hole on the K Street Mall?

BTW - although I agree that the exterior design of Le Rivage leaves something to be desired, the rooms and service are outstanding. Say what you want about Bob Leach, but he knows how to run a luxury hotel. Still skeptical about some mysterious Korean investors though...

[tronblue]

Shouldn't we also be skeptical in that Mo is in on this. I still remember his plan to destroy the facades on K street so he could envision his dream of a second story walk way akin to the mall. Horrible.

[Phillip]

Originally Posted by snfenoc

Is Sacramento the weakest hotel market in California? According to the article, Consus seems to think we'll recover faster than other markets. Maybe that's why they are willing to invest.

All the most recent recent reports I've seen put Sac in the bottom third among Cali hotel markets based on occupancy and revenue per room. Inland Empire and Palm Springs are down there too. Every market without exception is down from a year ago.

Just a few years ago Sacramento had one of the highest hotel occupancy rates in California---high 70's, low 80's. Now we're in the 50's. Demand is down but the larger culprit has been overbuilding, especially in the suburban submarkets.

The Bee used to print monthly occupancy levels for Sacramento's hotel submarkets--Downtown, Arden, Rancho Cordova, etc. Lately I've just been seeing one figure for the whole Sacramento region, with no breakout by submarket.

It would be interesting to know how downtown Sac's hotels are faring vs. the suburbs now. My guess is that Downtown might be in better shape (i.e. less bad) because Downtown didn't see rampant overbuilding of hotels like North Natomas and Roseville/Rocklin, for example.

[Phillip]

Originally Posted by wburg

phillip: You're right, it is in the 300 foot height limit.

wburg,

It was someone else that mentioned the 300 foot height limit but hello!

[Phillip]

Originally Posted by travis bickle

The W Hotel in San Diego can't cover their payments and is going belly-up. If you had that kind of cash, which has the greater potential - an existing luxury property a couple blocks from San Diego Bay... or a hole on the K Street Mall?

And right on cue...yesterday Starwood sold their W Hotel in downtown San Francisco to Asian investors for $90 million.

The W San Francisco is larger than the proposed K Street Hilton (423 rooms vs 408 rooms) but cost $45 million less. And the W is already built.

W Hotel sold to Hong Kong company
James Temple, Chronicle Staff Writer

Wednesday, July 8, 2009

Starwood Hotels & Resorts Worldwide Inc. has agreed to sell the W Hotel in San Francisco to a Hong Kong investment company for $90 million, representing a more than 50 percent drop from peak hospitality property values set two years ago.

The publicly traded company based in White Plains, N.Y., said in a statement it pursued the sale to reduce its debt. Keck Seng Investments Ltd. is expected to close on the deal at the end of the month.

Starwood, which opened the upscale, 423-room hotel at the crest of the dot-com boom in 1999, will continue to operate it as a W Hotel under a long-term management agreement. General Manager Michael Pace couldn't immediately be reached for comment.

The high-water mark for San Francisco hotel sales was set around April 2007, when Taj Hotels Resorts and Palaces based in Mumbai, India, bought Campton Place from Kor Hotel Group of Los Angeles for about $58 million. That amounted to more than $500,000 per room, nearly 60 percent more than the W's "per-key" price of less than $213,000.

The price reflects continuing weakness in the hospitality sector and tightness in the credit markets, said Mark McDermott, senior managing director of San Francisco hotel advisory firm PKF Capital. Hotel occupancy levels in the region fell 12.6 percent from last year and room rates declined 11.7 percent, the company reported.

Few hotel properties have been sold in the past few years, but the market has begun to loosen in recent months. Notably, San Francisco investment fund Geolo Capital bought the Carmel Valley Ranch resort from Blackstone Group for $20 million last week.

"We've finally basically bridged the buyer-seller gap, with sellers' expectations falling to levels where buyers are confident enough" to pursue deals, McDermott said. "We would expect this type of activity to represent, hopefully, the start of folks dipping their toes back into the water."

Jones Lang LaSalle Hotels represented Starwood, which listed the W hotel for sale late last year.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/08/BU4O18KLKU.DTL&type=printable

[Ghost of Econgrad]

Tsakopoulos Delivers 433,000-Sq-Ft Bank of the West Tower in
Sacramento
Project by Late Developer George Tsakopoulos is the California Capital's Third Largest.
Tsakopoulos Investments has completed development of Bank of the West Tower, a 25-story, 433,000-square-foot Class A office tower at 500 Capitol Mall in downtown Sacramento. It’s the third-tallest building in the Golden State’s capital city. Rudolph and Sletten, a wholly owned subsidiary of Tutor Perini Corp., completed work on the 396-foot high-rise designed by architect Ed Kado. The tower overlooks the Sierras, the Sacramento River and the
State Capitol rotunda.
Editor's Note: This article is excerpted from the current edition of In The Pipeline, CoStar Group's weekly column covering new development and construction. To receive the column every week by e-mail, join our distribution list.
Sacramento's second-largest law firm, McDonough Holland & Allen, PC, was the first tenant, signing a lease to occupy space on the 17th through 19th floors. Other law firms relocating to the building include Hanson Bridgett LLP, Somach Simmons & Dunn, and Stoel Rives LLP.
In addition to a bank branch on the ground floor, Bank of the West will have offices on the 11th and 12th floors.
The building features on-site management, 24-hour security, a fitness center with showers and locker facilities, cable-ready access, legislative audio access, an overnight express center, a planned restaurant and an 800 stall parking garage.

http://www.costar.com/News/Article.aspx?id=D7E9521A3F0B8B685008102CB4C1340D

[snfenoc]

I'm too cheap to buy a subscription to the Sacramento Business Journal, but they do offer excerpts of articles on their website. They did a piece on CADA's East End Gateway sites titled Financing deadlines loom for several East End Gateway sites. Here is the excerpt they offer of it on their website:

A joint powers authority dedicated to putting housing in Sacramento’s central city has proposals for all of its 16th Street “East End Gateway” sites, but the clock is ticking for developers to refine plans, secure financing and start construction.

The Capitol Area Development Authority is a city-state partnership that has seen proposals come and go for its sites due to plunging housing prices that have made infill development extremely challenging.

According to the authority, Ravel Rasmussen Properties and Separovich/Domich Real Estate have until Wednesday to close on property and start construction on two Spanish colonial revival style apartment buildings at 16th and O streets (East End Gateway Sites 2 & 3). CADA’s staff say the developers will miss that deadline and that will have to be addressed at an August board meeting. The first building of 24 apartments is estimated to cost $9.3 million to construct, and rents are projected at $1,400 to $2,100 a month. Construction costs haven’t been estimated for the second building.

A partnership of MNA Management Inc. and Foothill Partners has until Aug. 15 to provide a financing plan for the estimated $12.4 million condominium and apartment project it proposed at the southwest corner of 16th and P streets.

For those of you with access, it would be nice to know what the rest says. Things sure don't sound good for 16th Street.

By the way, does the Prop 1C funding received by Capitol Lofts (another project CADA has failed to deliver) mean that it is a go? Or are they waiting for a next round and a next round?

[sugit]

From what I understand, site II (the 24 apartment mixed-use project) actually has an offer for construction financing. I don't know if it's enough to get it off the ground though.

As for Capitol Lofts, even with the Prop 1C money, there is still a financing gap that needs to be filled.

To get more info on these, there is a 16th St. Streetscape meeting on July 21st at I believe the CADA offices where they will talk a bit about them.

In this tight credit market...I have a hard time seeing CADA not extending those deadlines if need be.

[Phillip]

Originally Posted by wburg

Some other new news: There was also a Mitigated Negative Declaration (MND) released for ANOTHER hotel project (15 stories high, 180 rooms) proposed for the southwestern corner of 10th and K (most recently the home of a Washington Mutual bank, I think.) An MND is basically a statement explaining why a site is below the threshold needed for an EIR, which means that such a project could get going a lot faster (no need for completion of an EIR, public review, etcetera.)

It's probably theoretical for now but if a new hotel was being built downtown I'd favor 10th and K over 8th and K.

The largest concentration of popular restaurants, clubs, and entertainment are east of 10th, and most people want to stay as close to the action as possible. Two blocks isn't a long distance, but people spending $150 or $200 a night for a room have choices and I think most would prefer the less edgy locations of Hyatt, Sheraton, or Citizen over 8th and K, at least as lower K Street (700/800/900) is today.

It would be different if 700, 800, 900 K were already more developed, or if a new 800K hotel was part of a larger plan to restore all three blocks of K street at the same time. But just a hotel by itself on 800, with 700 and 900 left as they are, I don't know who would prefer that location over the alternatives. I can understand why the city of Sac would want an 8th and K location above all others though, after the money and effort they've spent trying to revitalize that block.

Also, views are one reason people will pay a premium to stay in highrise hotels and the views from 10th and K should be much better than from 8th and K. From 10th and K the Citizen Hotel, Elks Building, and Cesar Chavez Park would be visible to the north, once you get up a few floors, and Capitol Park and the Dome to the southeast. Contrast to 8th and K where the Renaisssance Tower totally obstructs views north, and I don't think there's much of visual interest due south.

Finally, love it or hate it, the Renaissance Tower (Darth Vader) is one of the most dramatic and recognizable buildings on Sacramento's skyline. Even people who never go downtown know the Renaissance Tower from driving past on U.S. 50. A highrise at 800K would severely block that familiar view of the Renaissance from the freeway. From a "building up the Sacramento skyline" standpoint a highrise in almost any other location than 8th and K, where there's already one tall landmark in residence, would accomplish more.

Btw, I walked past the 800K site today just to see what the Bel-Vue looked like. I'm embarrassed to admit after all the talk about Bel-Vue here that I had no image or memory of the Bel-Vue. And yes, it is a handsome building, at least the facade facing 8th Street. Why did the city close it?

[Pistola916]

Bob Shallit: Move quickly or lose hotel financing deal, Sacramento told
[email protected]
Published Saturday, Jul. 11, 2009

Developers of a proposed downtown hotel project have a not-so-subtle warning for city officials:

Act quickly to back the project or risk losing a $91 million financing commitment from a South Korean investment group.

The Sacramento developers – a joint venture of Parkcrest Development and USA Hospitality – want city officials to donate the land for the 25-story hotel and a six-level garage on Eighth Street, between K and L. That would be a departure from earlier city plans to sell the land to developers.

The Parkcrest and USA team also wants the city to forgo some taxes during the hotel's first few years of operations.

If those incentives are granted within a few months, Seoul-based investment firm Consus Asset Management "is in," says Sungmin Park, a Parkcrest VP.

But, he says, delays could force Consus to take its money elsewhere: "This is very time-sensitive."

Park says his Korean American company worked for years to get Consus to invest in U.S. projects, but the company was focused on China, Russia, South Korea and other markets where returns were higher.

Setbacks in Asia last year prompted Consus to look for "safer havens" and back the Sacramento project.

Parkcrest is kicking in $8 million, and other local investors, including Moe Mohanna, have committed millions more, giving the developers sufficient funding for the $136 million project, Park says.

Now, he adds, "we just need the city to say 'yes' to us."

City staffers are negotiating with the developers over terms of any deal. The issue is scheduled to go before the City Council on Aug. 4.

[tronblue]

Here is your free land and no taxes


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[Majin]

They should do it, no need to wait to august just give them the land now.