Real Estate News

Apartment living coming back to K Street Mall downtown

mcrisostomo@sacbee.com

Sacramento’s K Street Mall, already a nightlife hot spot, will soon welcome a new nocturnal presence: upscale residents.

A group of homegrown developers will open 21 upscale apartments as early as June in the former Pyramid Ale House, a stately and historic building at 11th and K streets, where they hope to attract, among others, Capitol workers looking to live just steps away from the office.

The project would be the first to open out of three notable housing projects now under construction on the corridor. Another local development group is building 137 apartments spanning the entire 700 block of K Street, adjacent to the new Golden 1 Center arena. Those units are targeted for opening next spring, bringing residents and a row of new retail, restaurant and other business to what had long been a blighted block.

Also in spring, the Sacramento Kings plan to open 45 highrise condominiums, many of them overlooking the arena plaza on K Street. Team officials say they also are about to propose a major mixed-use project at Eighth and K streets. The team has not yet released details or timing.

Although people have been slowly moving back into midtown and downtown for two decades, city officials say the ultimate step in making downtown healthy will be repopulation at the city’s heart, K Street, the long-troubled avenue that once was the epicenter of Sacramento Valley life and culture, but fell into blight in the 1960s.

The Sutter Capital Group, headed by four young Sacramento-raised entrepreneurs, purchased the mainly empty 11th and K streets building formerly occupied by Pyramid a year and a half ago for $4.4 million. The group spent millions more transforming the onetime department store into the kind of mixed-use project the city covets on K – three floors of apartments, a restaurant, retail and office space, and an event center.

The development group’s pitch to potential tenants: Location.

Their building sits a block from the Capitol. It is just steps away from the Cathedral of the Blessed Sacrament, two blocks from the Community Center Theater, three blocks from City Hall, and five blocks from the new arena.

It shares perhaps the busiest after-hours block in the city with the Crest Theatre, Empress Tavern, Pizza Rock, California Family Fitness, KBar, District 30 nightclub, and Ambrosia cafe.

“It’s Sacramento’s proverbial Main & Main,” said Burke Fathy, a managing partner with Sutter Capital Group. “This is an iconic corner.”

The structure is known as the Ransohoff Building, after the department store that once called it home. The Ransohoff name is still spelled out in floor tile in the main entrances. But Fathy’s group is branding it the MAY Building in recognition of the 1911 structure’s original downstairs occupant, the Mohr and Yoerk Packing Co., a grocery store and meat market.

The project includes an event center, recently opened in the smaller art moderne building on 11th Street, marketed to small groups, including associations and officials with business at the Capitol or groups for wedding and parties.

The one-bedroom apartments will range in size from 550- to 950-square feet. Served by a vintage elevator, the units will combine modern finishes and appliances with original building details such as built-in hutches, trim, coved ceilings and pocket doors. The units were, in fact, apartments when the building first opened more than a century ago.

One, on the fifth-floor corner, has a birds-eye view of the Capitol dome. Others overlook the cathedral. One looks out on the Crest marquee. Light-rail trains trundle past on the street below.

Fathy said rents will depend on how much interest his group gets from prospective tenants. The group launched prelease registration last week. “We’ll see where the demand is.”

The MAY Building won’t be be the first upscale apartment complex on K Street in modern Sacramento. That distinction goes to the Cathedral Building, which houses Ella restaurant and sits at the corner of 12th and K streets, a block away. It opened a decade ago with 23 apartments.

 

A one-bedroom apartment in the Cathedral Building is being advertised for $2,000 a month. That and other nearby rents suggest that well-appointed apartments on K Street could rent for around $2.75 a square foot.

Cathedral Building owner Robert Clippinger said his building has rented well over the years, often with lobbyists and lawyers, although he had to reduce rents during the recession. Clippinger said he is pleased to finally see more housing arrive on the K corridor. “Maybe we’ll actually get a grocery store somewhere nearby.”

Like Clippinger’s Cathedral Building, the MAY Building developers say they hope to land a restaurant to anchor the large 8,150-square-feet ground floor room, with a 1,150-square foot mezzanine.

“We’re trying to stay patient and find the right fit,” Fathy said. “It is going to take a well-positioned operator for a space this size.”

Michael Ault, head of the Downtown Sacramento Partnership business group, lauded the MAY Building developers as well as others working in and around K Street.

“They are presenting exactly what we had hoped to see for the evolution of downtown,” Ault said. “They have a creative approach to doing housing. It is not just about buying property for investment. It is about making active urban spaces.”

Notably, the MAY Building will be built with no public subsidies. Both the Cathedral Building and the 700 K Street project now under construction got help from the city.

Ali Youssefi, a partner on the 700 K Street project, says the MAY Building project offers a preview of what can happen on K Street.

“I love this project,” Youssefi said. “I hope it will set an example.”

The street remains blighted in several spots. The K Street area has a high level of calls for police service, and transients often still outnumber shoppers.

“I wouldn’t underestimate the social challenges on K Street,” said City Councilman Steve Hansen, who represents downtown. The new residents and refurbished buildings, however, will help change the look and feel of the street, he said.

“There are a lot of young professionals who are excited to be urban pioneers, and we need those people who want to be urban pioneers.”

Youssefi of CFY Development agreed. “Once we turn on the lights and open the doors along these blighted blocks, the environment is going to change,” he said.

Youssefi’s project on the 700 block of K Street will have some apartment units priced for low-income earners, a requirement attached to the public funds.

But Darryl Rutherford, executive director of the Sacramento Housing Alliance, said the city is not doing nearly enough to encourage construction of less expensive apartments that workers at nearby restaurants and the Golden 1 Center could afford.

“We are not seeing the types of things we need to make sure that workforce can afford to live where they work,” he said.

The city has a fund for low-income housing, paid into by housing developers. But, for now, infill developers are excused from chipping in to the fund, and that means less money available for the city to produce the variety of rental housing stock that can serve less than high-income workers. City officials, for their part, say they hope the exemption will encourage more infill development, notably downtown. They say they will review that policy in four years.

The higher rents expected for many K Street apartments reflect the higher costs of rehabilitating old buildings, said broker John Mudgett of Turton Commercial Real Estate.

He and downtown developers say the renters will come if the project is attractive. Mudgett says there are people who want to walk to work, who like having restaurants, cafes and nightlife literally outside their front door, and do not mind crowds, activity and noise in the neighborhood.

“There will be young professionals and transplants (from other urban areas) who are OK with those trade-offs,” Mudgett said. “They want this walkable experience, where there is no such thing as freeways and traffic.”

Tony Bizjak: 916-321-1059, @TonyBizjak

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