Downtown's projects rise in face of downturn
Hotels, offices, lofts in Sacramento's core are staying on track.
By Mary Lynne Vellinga -
[email protected]
Published 12:00 am PDT Friday, July 4, 2008
Standing at the corner of 10th and K streets, in the heart of downtown Sacramento, there's little sign of the real estate free fall slamming the suburbs.
On one corner, dust rises from the construction site of a musical theater, restaurant and bar complex – The Cosmopolitan – scheduled to open in September in a former Woolworth's store. Across the street, crews are renovating another old department store into "office condos."
Corner by corner, the gradual metamorphosis of Sacramento's core continues to unfold, much as it has for the past decade.
"We're just percolating right along," said Leslie Fritzsche, city downtown development manager.
While developers predict activity will slow, they say it's unlikely to stop. Various forces are combining to keep the construction crews working.
Concern about traffic and global warming, combined with gas priced at nearly $5 a gallon, is driving interest in downtown, developers say.
"The region, along with the country as a whole, is starting to rethink how far away they want to be from the different destinations in their lives, with the goal of ideally living and working and playing in a more central kind of region," said Ellen Warner, a partner in David S. Taylor Interests, a prolific downtown developer.
The suburban lifestyle isn't about to disappear, but over time the central city will become an increasingly attractive option, agreed home industry consultant Greg Paquin, president of the Gregory Group in Folsom.
The growing collection of restaurants, shops and entertainment venues will create a draw of its own, he said. "It's going to be all this synergy."
Walkable projects sought
Public spending also plays a role. Increasingly, government at all levels is steering money to the central city – trying to foster transit-friendly, walkable places.
Millions of dollars in state and local funds will slosh into downtown in the next few years. It comes from property taxes captured by the Sacramento Housing and Redevelopment Agency and voter-approved state housing and transportation bonds.
Stan Thomas, developer of the Sacramento railyard, will get $47 million this year in state housing bond money to build streets into his proposed development.
Township 9, a planned development of 2,350 housing units in the Richards Boulevard area, is earmarked for $19.1 million. Another $23 million is destined for the Triangle area on the West Sacramento riverfront, which is approved for as many as 5,000 housing units and 2 million square feet of office space.
Downtown isn't immune to market forces. Projects opening now were mostly started during the real estate boom – and were too far along to stop when the bottom fell out. Housing has been particularly hard hit.
Downtown developers say they've had to heavily discount their product to move it, and they're making little, if any, profit these days.
"This is a depression in real estate; everybody who was really flying high isn't anymore," said developer Mark Friedman, who has sold 12 of his 26 Sutter Brownstones in midtown.
Friedman – whose family also owns Arden Fair mall – said urban developers are in better shape than those who placed all their bets on continued growth on the suburban edge.
Growth at moderate pace
Unlike the suburbs, downtown and midtown didn't experience a boom in housing in the past decade. They grew, but at a relatively modest pace, while the suburbs sprouted thousands of housing units every year.
Today, that slower growth has become an advantage: The central city isn't burdened with an enormous inventory of unsold or unrented properties.
"I'd much rather have my risk position be in downtown or midtown Sacramento than in the outlying suburbs," said developer Mike Heller, a partner of Friedman's whose portfolio includes downtown and suburban offices.
While huge condo towers touted for downtown didn't survive the market slump, other housing, office and entertainment venues did.
• At 10th and J, a 1920s, Beaux Arts office building will reopen as the Citizen Hotel, the city's first high-rise boutique hotel.
• David Taylor's new U.S. Bank Tower on Capitol Mall features a nighttime LED projection display of a flowing river across its 80-foot-tall, louvered top. Another office tower is going up across the street.
• The former Firestone tire dealership at 16th and L will reopen this fall as The Firestone – a complex with a Fleming's Prime Steakhouse, a California Pizza Kitchen, DeVere's Irish Pub and an upstairs lounge operated by the family that runs Mason's, Ma Jong's and The Ultra Lounge.
• The owner of the Firehouse restaurant in Old Sacramento is nearing completion on a replica of the Gold Rush-era Orleans Hotel. The five-story building has 24 loft-style apartments and a restaurant and retail space downstairs.
• On Sept. 26, The Cosmopolitan will debut with a party and opening of "Forever Plaid," a show staged by the California Musical Theatre, in the new, Cosmopolitan Cabaret. Restaurateur Randy Paragary will run a deli-inspired restaurant, Cosmo's, in the downstairs, and a Las Vegas-style nightclub with a rooftop patio overlooking K Street.
• Heller just converted an old Travelodge motel at 11th and H streets into Retrolodge, a complex of 50 tiny offices renting for about $600 to $1,500 a month. The two buildings are decorated in a 1950s style and named Elroy and Astro after the cartoon TV show "The Jetsons."
Even as these projects get finished, there are signs that some of downtown's tougher spots are about to get some attention.
K Street's ample collection of run-down buildings attracted the notice of Napa's Trancas Ventures, which renovated the former Roos Atkins department store at 10th and K streets into "office condos" and has bought other buildings nearby. The firm is negotiating to buy the Crest Theatre, and has been talking to the city about renovating into a hotel a closed bank at 10th and K.
"We've always made it a practice of finding buildings nobody wants and creating buildings everybody wants," said Trancas adviser Jim Brennan.
Shopping mall giant Westfield says it will start construction by early next year on a long-awaited face-lift for Downtown Plaza.
"I'm really encouraged," Fritzsche said. "They have indicated they want to move their construction crews from work they're doing in Roseville straight down to do work on Downtown Plaza."
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) and Heather Fargo...HARDLY what I'd call a great candidate pool. So, yes, I will be doing what is best for California and voting for a good liberal mayor from either San Francisco or Los Angeles if they're running!
Maybe on here....
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