Sacramento's 16 Powerhouse apartment building, a "luxury" mixed-use space across from Fremont Park in midtown, has sold for $32.5 million.
It's a record price in a market that continues to see growing demand and interest, said Ken Turton of Turton Commercial Real Estate, which brokered the deal that closed Tuesday.
"It's the highest price paid per door for an apartment complex in the Sacramento urban core," Turton said.
Sacramento-based Demmon Partners purchased the building from developer D&S Development. The company completed the project in 2015.
"It's the best apartment building in downtown Sacramento," said Charlie Demmon, a partner in the family-owned business. "It has to do with both its unique location there on Fremont Park ... and the great finishes in the apartments."
Standing at the corner of 16th and P streets, the building houses Magpie Cafe, Orchid Thai and Insight Coffee in its ground-floor retail space. The remaining five and a half stories contain 50 one- and two-bedroom apartments.
The building sits across from Fremont Park, a location that is within walking distance of the Capitol, downtown businesses, the still-growing R Street corridor and the new Ice Blocks development.
Turton said rents in the Sacramento market had been below national averages for similar size cities, but the last few years rents have soared. Vacancy rates in Sacramento have hovered between 2 percent and 3 percent for months. The national vacancy rate in December 2017 was 4.8 percent, according to real estate analysis firm Yardi Matrix.
16 Powerhouse was particularly attractive for investors, Turton said, because its 50 residential units are in high demand.
"The Sacramento multifamily market is one of the fastest growing in the nation as far as rent escalations are concerned," he said. "The audience for these apartments ... they don't have a lot of supply to choose from.
"It's kind of the perfect storm of location and quality and demand relative to supply."
When the building was completed in June 2015, units rented for between $2,000 and $4,500 a month, expensive for the Sacramento market that was just starting to heat up at that point. Yardi Matrix estimated the average rent was $1,145 in 2015.
According to a Bee article, owners already had rented half the units by the time it opened.
Rents currently are between $2,500 and close to $5,000 when there is an available unit, Demmon said.
16 Powerhouse offers 10 apartment configurations, five basic layouts and five loft versions. They range from 801 square feet to 1,235 square feet and have either one bedroom and one bath or two bedrooms and two bathrooms. The units feature high-end appliances, stone counter tops, large closets, wood floors, big windows and balconies.
The building went on the market in December and Turton said his firm received multiple offers within the first two weeks, including the offer from Demmon Partners. The eventual sale price of approximately $570,000 per door comes on the heels of the sale of the Eviva Midtown building at about $450,000 per door including retail income, he said.
The affordable housing crisis sweeping through California has not left Sacramento unscathed. As rents have rapidly climbed, wages have not kept pace, pricing out more and more longtime downtown and midtown residents. Advocates have sounded the alarm with calls for affordable, low-income units, but few such options have materialized.
D&S Development currently is building another apartment building near Fremont Park at the corner of 15th and Q streets. Developers are building a number of projects in midtown that will add to the center city's housing stock including a high-rise at 19th and J streets, town homes along 20th Street between P and R streets, and apartments at 19th and Q streets.
People have begun moving into the new apartments at the Ice Blocks development on R Street between the Safeway and 17th Street. Construction has yet to begin on a 253-unit building called The Press to be built at the corner of 21st and Q streets.
Ellen Garrison: 916-321-1920, @EllenGarrison