Exclusive: CalPERS to sell downtown Sacramento’s ‘hole in the ground.’ What happens now?
The infamous hole in the ground is getting a new owner.
After 16 years of ownership, CalPERS has decided to sell 301 Capitol Mall, the empty lot at the entryway to downtown Sacramento that has been vacant for years, Marcie Frost, the pension fund’s CEO, told The Sacramento Bee on Thursday.
CalPERS has asked Hines, which has managed the site for CalPERS since 2019, to find a broker and begin the process of selling the land. Hines expects to have a broker in place by the end of April, CalPERS officials said.
The sale would put an end to a winding chapter for CalPERS, which spent $70 million buying and maintaining the property but ultimately fell short of landing the signature development project city leaders have long sought.
The fund first partnered with Saca Development of Sacramento on a plan to construct two 53-story condo towers that would have been the tallest residential buildings on the West Coast at the time. Construction began in 2006 but ended the following year as the recession took hold.
CalPERS then transferred the property to the Los Angeles-based CIM Group and developed several plans for the site in the years that followed, including a 33-story, $550 million tower that would have been the city’s tallest skyscraper. CalPERS and CIM said at the time they would only start construction if they found a major anchor tenant for the building.
That proposal was also eventually scrapped and CalPERS later shifted management of the property to the Houston-based Hines.
The decision to sell was motivated by a CalPERS real estate investment strategy that has shifted focus over the past decade. When it took over the land in 2006, CalPERS focused on development and growth for its real estate portfolio, Frost said. It now prioritizes “income generating (projects) and core assets that provide inflation protection.”
“What we found through numerous market cycles and numerous ideas (for 301 Capitol Mall) is there is not a development project there that fulfills the risk return that we would fundamentally have,” Frost said.
The empty lot at Third Street and Capitol Mall, once home to the former Sacramento Union newspaper, has stood as an unfulfilled opportunity for nearly two decades. It sits at the entryway to Sacramento and its downtown, just a few blocks from the state Capitol, Old Sacramento and Golden 1 Center.
As it stood surrounded by a fence, other projects near 301 Capitol Mall have moved forward. The Frederic, the first residential project on Capitol Mall recently opened. And Southern Land Co., a Nashville, Tennessee-based development firm, is planning to begin construction next year on a 32-story high-rise apartment and office building across Capitol Mall from the CalPERS site.
Sacramento Mayor Darrell Steinberg said developing the “prominent” land at 301 Capitol Mall is vital to downtown’s future.
“I’m excited to get engaged on the possibilities for this important piece of property at the entrance to our city,” Sacramento Mayor Darrell Steinberg said. “Every piece of land in our downtown – especially one so large and prominent – should be developed in a way that contributes to the remaking of our central city with more housing and other uses that will add vibrancy in a time when employees appear less likely to be in their downtown offices every day.”
This story was originally published April 8, 2022 at 5:00 AM.