Kaiser Permanente is spending $40 million on a mostly vacant office building near the new Kings arena in downtown Sacramento, a further sign of the rejuvenation of the central city real estate market.
The health care giant plans to turn the six-story Sacramento Corporate Center into medical offices and an outpatient clinic. The building, at 501 J St., is across the street from the arena scheduled to open in 2016.
“We are in contract to purchase 501 J St. with plans to convert it to a medical office building in the future,” Kaiser said in a prepared statement Thursday. “Kaiser Permanente is committed to the Sacramento community, and we are pleased to be part of the revitalization of downtown by bringing a new convenient care location to this area. At this time, projected construction and completion dates are not set.”
Greg Levi of JLL, the real estate firm that represented the seller, called the arrival of Kaiser “a big deal for downtown.”
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“Downtown has mostly been about state tenants, lobbyists, lawyers,” he said. “Now we’re getting medical.”
The purchase raises questions about Kaiser’s future development in the Sacramento area. City officials have been pushing Kaiser to build a hospital on the site of Sleep Train Arena in Natomas, which will go dark after the Kings move downtown. Kaiser officials have been noncommittal other than to say they want to build a new hospital somewhere in the region.
“We continue to explore the availability of property in the greater Sacramento area for possible long-term health care services development,” Kaiser said Thursday. “Our Sacramento Medical Center on Morse Avenue meets state seismic-safety standards through 2030. We are evaluating our options beyond that date, both at the Morse Avenue site and at other locations. Any such development would depend on a variety of factors, including membership needs in the area and securing all required government and other approvals.”
For the time being, business leaders hailed the Kaiser downtown acquisition as a shot in the arm. Michael Ault, head of the Downtown Sacramento Partnership, called the purchase “a great example of the renewed investment interest” in downtown. “People want to be in proximity to the new arena.”
The building was surrendered to lenders by its previous owner about two years ago, a casualty of the real estate bust. The owner “made it simple and gave them the keys back,” Levi said. Since then, the building has been controlled by LNR Partners, a “special servicer” based in Miami. Special servicers are firms that deal with distressed debts.
Levi said the sale from LNR to Kaiser is on the verge of closing. The building, which encompasses nearly 200,000 square feet, has just one tenant.
Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.