Grant Lammersen, a Cushman & Wakefield broker who represented the seller with his partner George Eckard, declined to reveal the purchase price of either building; however, a source familiar with the deal tells GlobeSt.com that CIM paid around $100 million for the 26-story trophy property. The source also notes that TIAA-CREF purchased the building, located at the corner of 9th and J Streets, for $159 million in 2006.
[IMGCAP(2)]The unidentified source tells GlobeSt.com that HRPT paid right around $40 million for the 14-story class A Capitol Place building at 915 L St. The source also notes that TIAA-CREF purchased building for $39 million in 2003.
As for reasons for selling, a TIAA-CREF spokeswoman tells GlobeSt.com that "TIAA-CREF continually seeks to improve the quality of its real estate portfolio by realizing value through select sales as well as through carefully identified acquisitions," but could not provide further information.
CIM Group owns three other properties in the area: The Sheraton Grand Hotel, an apartment complex at 800 J St. and a partial interest in the planned 1000 K. St. mixed-use project in the former Woolworth building in Sacramento's urban core. According to Lammersen, CIM's purchase—which also includes a development site next door currently operating as a parking garage and home of the Mexican Consulate—is part of its "core urban fund." Lammersen also tells GlobeSt.com that CIM's purchase "proves their commitment to the downtown area." CIM is not currently planning anything for the development site next door, Lammersen says.
The buildings were marketed as a portfolio and were offered "unpriced," says Lammersen, and multiple offers were received on both properties. "One interesting thing about the sale of these two buildings is that it was the largest multitenant office deal on the West Coast in what some view as a secondary market," he says.
According to the unidentified source, the seller was able to get aggressive on pricing for 915 L St. because of the location, which is directly across the street from the Capital. "Tenant demand is driven by that," the source says," a point echoed in a recent market forecast by Grubb & Ellis (see below).
The building at 915 L. St. is 97% occupied, and 980 9th St. is 84% leased to tenants like State Street Bank, which is signed on through until 2015, according to the unidentified source.
CIM couldn't be reached for comment. HRPT was also not able to be reached for comment by press time.
According to a Grubb & Ellis market forecast, a lack of employment growth has undermined confidence in the Sacramento commercial real estate market. G&E expects the market's vacancy rate to remain relatively flat in the coming year. The Sacramento commercial real estate market is not anticipated to start recovering until 2011 at the earliest, when the job market is expected to turn around, says Bob Dean, executive vice president and managing director of Grubb & Ellis' Sacramento office.
Dean continues that "free rent, relocation allowances, tenant improvement capital and lease extensions are all trends expected to continue throughout 2010 in Sacramento's office market." He adds that net effective rents are expected to decrease throughout the year. "Additional negative absorption, approximately 200,000 square feet, is anticipated in 2010, although at a slower rate than 2009."
Sacramento's office market is driven by the activity of its largest employer, the State of California, Dean says. "This has caused area landlords to become more competitive for this business by offering tenant concession packages."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
