Developer Larry Kelley and his partners paid $18.1 million to become the first Sacramentans to own the downtown railyard since the city’s original railroad tycoons in the 19th century.
Kelley’s company, Downtown Railyard Venture LLC, closed on the long-awaited purchase of the 200-acre property Wednesday, easing the way for development of a proposed hospital, Major League Soccer stadium and thousands of homes.
Documents filed with the Sacramento County recorder show Downtown Railyard borrowed the entire purchase price, $18.1 million, from the seller, Illinois-based InvenTrust Properties Corp. The documents weren’t available until Friday.
The sale price suggests InvenTrust took a big loss on its involvement in the railyard, which began as a lender. InvenTrust took ownership in 2010, after Georgia developer Thomas Enterprises was unable to repay the $125 million it borrowed from the Illinois company.
Denton Kelley, Larry Kelley’s son and a partner in Downtown Railyard, wouldn’t discuss the financial details of the transaction. A spokesman for InvenTrust wasn’t available for comment.
The Kelley firm has taken control of a historic property that was opened to serve the transcontinental railroad in the 1860s. City Historian Marcia Eymann said the last Sacramento owners were a group that included Leland Stanford and Mark Hopkins, two of the “Big Four” railroad entrepreneurs who were enormous influences during the city’s early history.
“We’re in high company,” Denton Kelley said with a laugh when told of the parcel’s previous ownership.
Central Pacific, Southern Pacific and then Union Pacific operated the railyard for more than a century before UP closed the facility in the 1990s; city officials have been trying to get the property redeveloped ever since.
Kelley’s deal has been percolating for two years but encountered numerous delays on the road to completion. What broke the logjam was an agreement between UP, the Kelley firm and InvenTrust on paying for the cleanup of any toxic materials that haven’t yet been discovered on the property. The state Department of Toxic Substances Control has approved a land-use covenant that gives the Kelley firm the right to develop on a majority of the property.
Kaiser Permanente has said it plans to build a major hospital in the northwest corner of the railyard. Sacramento Republic FC, of which Larry Kelley is a minority owner, would build a Major League Soccer stadium at the northeast corner if, as expected, the team is granted a slot in MLS.
This week’s purchase doesn’t include about 33 acres the city has owned for several years at the southern end of the railyard. The city agreed to buy that parcel in 2006 for about $52 million as part of a complicated arrangement to help Thomas finance his purchase of the rest of the railyard from UP.
Denton Kelley said the city intends to keep the parcel, which includes the existing train station at Fourth and I streets, as the site of a new mass-transit hub. “It’s something we’re going to collaborate with them on,” he said.
The city is currently in the midst of a $30 million renovation of the historic train station, now called the Sacramento Valley Station, which was opened in 1926 and features a massive mural depicting the launch of the transcontinental railroad in 1863. The depot is the seventh busiest train station in the national Amtrak system, and the second busiest west of Chicago.