Real Estate News

Competition heats up for former school district headquarters in midtown Sacramento

Last fall, a developer started talking to Sacramento City Unified School District staff about swapping a piece of south Sacramento land to the district in exchange for its long-vacant former headquarters at 16th and N streets.

Since then, other potential developers have emerged, and the competition for the increasingly choice piece of midtown real estate has become intense.

The 1.2-acre parcel at 1619 N St. is occupied by a historic 1923 structure that once housed the Thomas Jefferson Elementary School. State Senate President Pro Tem Darrell Steinberg had hoped to build a unity center there to promote racial tolerance, but the plan fizzled in 2011 for lack of funds.

Three different development teams are now floating proposals that include stores, housing, a boutique hotel and a Native American health center. The school board has scheduled a May 15 meeting to consider how the interested parties will compete.

Developer John Hodgson, working with Cresleigh Homes, has proposed a $40 million project that would include retail and market-rate housing. He called the area around 16th and N – which is undergoing a boom of new housing development –“the crown jewel of midtown.”

Hodgson began talking with school district staff last fall, ultimately proposing a land swap. He said that approach would have eliminated the legal need for the district to seek bids from nonprofit agencies and other developers.

A few weeks ago, Hodgson thought he had a deal ready to go before the school board.

Other developers also had their eyes on the property, however. Earlier this year, Domus Development project manager Bernadette Austin had gone in search of a place to expand the nonprofit Sacramento Native American Health Center. She said she was thwarted in her initial effort to engage district staff about buying the N Street property.

Superintendent Jonathan Raymond, who left the district at the end of last year, had urged staff about two years ago to explore a land swap for the N Street property.

Eventually, Austin said, the group appealed directly to school board members about its proposal for a California Tribal Life Center, which would include affordable housing and a health clinic for tribal members and the public. The group submitted its proposal late last month.

A third proposal was submitted last week, this one from developer Bay Miry of D&S Development, which is building the 16 Powerhouse housing project two blocks away. Miry said he has been talking to district staff for a couple of years about the best use of the N Street property. He has proposed leasing the parcel for 100 years and building a $60 million project that would include a boutique hotel and townhouses.

Confronted with the competing proposals, the district scheduled the May 15 open board meeting. “I think there was more interest in this property than anybody had anticipated,” said board President Patrick Kennedy. “Recognizing that, we have decided to do this fully out and open and publicly.”

Kennedy said he expects more development proposals for the N Street site to roll in, as he has already heard from other interested parties.

Sacramento City Councilman Steve Hansen, whose district encompasses the midtown property, said any project will be subject to city review. “My hope is that the school board gets the best value for the land, does what’s right for the community and punts it to the city to let us make decisions on the land,” Hansen said.

The rival development teams have been lining up endorsements. The Native American Health Center and Domus late last month received the backing of Steinberg, Sacramento Mayor Kevin Johnson, Assemblyman Richard Pan and California Lt. Gov. Gavin Newsom.

More than a decade ago, Steinberg sought to create a museum of tolerance at the site. Plans were completed in 2009 for what was to become a three-story Unity Center at the N Street site. Two years later, however, the idea was shelved after the project ran out of money.

Supporters say the tribal center would expand an existing health clinic to add 45 jobs, up from the current 90 employees. It would include 50,000 square feet of office space, a pharmacy and cafe operated by the clinic, plus retail and affordable housing. It would include a park, a cultural heritage museum and office space for nonprofit groups.

Andrea Leisy, an attorney for Remy Moose Manley in Sacramento, urged school board members in a letter last month to consider a section of the education code that would allow the district to sell the land to a nonprofit for less than fair market value if the site is historic and it would be used for a public benefit.

Hodgson, working with Cresleigh homes, has garnered support from the Midtown Business Association, the Midtown Neighborhood Association, the Sacramento Metropolitan Chamber of Commerce and Councilman Jay Schenirer. His group has an option to buy 5.3 acres at 7050 San Joaquin St., near Hiram Johnson High School, for just under $1.4 million. The plan would be to swap the property with the district for the midtown site.

Hodgson said the Cresleigh group would give fair market compensation for the N Street property if the swapped properties are of unequal value. He said the project would add millions of dollars in added tax revenues to the school district and to other entities.

The Cresleigh group, working with Vrilakas Architects, would build ground-floor retail and market-rate housing. “We’re looking at at least six stories of residential, depending on what the city wants, the neighbors want and the economics dictate,” Hodgson said. The corner of 17th and N streets would include a cafe bistro with indoor-outdoor seating.

Miry of the family-owned D&S Development said his proposed 100-year lease would enable his company to build a 132-room boutique hotel, 9,400 square feet of retail, 30 penthouses and residential townhomes. The old Jefferson School would be renovated into apartments.

The developers would extend a $300 monthly discount to school district employees wishing to live the market-rate housing. Miry said the project would generate hotel tax, and at the end of the lease (one century later), the city will own a much more valuable piece of property.

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