Tipping Point

Sacramento’s downtown could double in size. Here’s why

For a quarter century now, Sacramento leaders have pushed to make the shuttered downtown railyard something more than an oily and empty ghost of Sacramento’s railroad past – and at times wondered if it would ever happen.

The wondering is over. The building begins.

Although history suggests no redevelopment comes easy in the old yard, Monday’s announcement that Sacramento is now a Major League Soccer city has sent the soccer investor group into fast-forward: They have until February of 2022 to build a quarter-billion-dollar soccer stadium as well as streets, sidewalks, plazas and a light rail station in the northeast section of the railyard to prepare for their first season in the top-tier soccer league.

Crews likely will be out in the next month conducting stadium site prep work just east of Seventh Street, though major construction of the stadium will launch next spring.

Team officials meanwhile report they are on the hunt for a corporate sponsor whose name will be featured on the stadium, and say they are in early talks with the National Women’s Soccer League about bringing a women’s team to play at the site. They’ve also had discussions with professional rugby and lacrosse associations, as well as international concert promoters.

“It’s a new era,” Mayor Darrell Steinberg said this week. “Our long decades of waiting for the railyards to happen are over.”

The stadium should serve as a catalyst for other railyard development projects, the mayor said. But it’s just one of several projects about to launch there. The former railroad construction and maintenance yard, which closed in the early 1990s, could become Sacramento construction crane central with simultaneous projects by next spring.

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A conceptual drawing submitted in 2017 shows the new Sacramento courthouse on the edge of the railyard infill development. NBBJ/Motiv

A list of major projects planned for the site include:

  • A $490 million, 17-story state-constructed Superior Courthouse near the stadium could be under construction next spring and open in three years.
  • A Kaiser Permanente hospital and medical complex covering several blocks could be under construction in the next 18 months, and open by 2025.

  • The first railyard housing project, a 300-unit project called Revolve, should be under construction in 2020 and open about the time the soccer team arrives.

  • Another 150-unit low-income, affordable apartment project could be underway in the next year as well.
  • An office project, called The Foundry, is planned for construction in a year. It will be two six-story buildings with a timber and glass design similar to the office at 16th and R streets that is part of the Ice Blocks neighborhood.
  • Developers are in talks with a hotel chain about building a 250- to 300-room hotel.

Among those at Monday’s MLS announcement were Larry Kelley and Denton Kelley of LDK Ventures development company, owner and developer for much of the railyard, and the group that has a deal in place to sell land for the stadium to the Republic FC soccer group.

“It’s been a long road getting here,” Denton Kelley said. “It’s very rewarding to see all these stakeholders having a commitment to the project. We couldn’t be more pleased to be part of Sacramento’s future and success. We feel privileged and honored.”

Will a soccer stadium attract millennials?

Kelley said he believes the soccer stadium will establish a distinct personality for the railyard as a cool, urban place attractive to millennials, and that could set the tone for other future businesses, such as young, tech-related companies.

Full development of the 240-plus acre railyard will almost double the size of downtown Sacramento, and is expected to take decades. But Monday’s MLS announcement made it a whole lot easier.

The soccer investor group, led by Beverly Hills billionaire and supermarket magnate Ron Burkle, plans to not only build a 20,000-plus seat stadium on 14 of those acres, it is buying another 17 adjacent acres from LDK to create an extended arena district.

Speaking to The Sacramento Bee this week, Burkle declined to say what his group may build there, but said it will be something that will enhance fan experience at the stadium. The Sacramento Kings recently did that in an eye-opening way at Golden 1 Center, where they built a hotel and condo tower, and added restaurants, other entertainment venues and stores, all of it surrounding a central event plaza.

The ancillary development adjacent to the soccer stadium site is expected to help Burkle’s group produce revenue to cushion the record $200 million expansion fee they must pay for entry into the now 29-team soccer league.

BEHIND OUR REPORTING

About this story

At 240 acres, Sacramento’s downtown railyard is one of the largest opportunity areas in any American city. After decades of waiting, its time has come.

The construction of a Major League Soccer stadium, expected to start next year, is being counted on to spark the area’s development. Housing, a hospital and a courthouse should follow.

But after decades of inaction, will this time be different?

Tipping Point

This story is part of Tipping Point, our new project focused on telling the stories of the Sacramento region’s evolution. We have formed a team of reporters and editors who are writing weekly stories focused on the challenges and opportunities in the region.

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“From a financial perspective, if we can ... build profitable things there, that helps us bring price into context,” Burkle said this week. “But more importantly than bringing the price into context, it helps us control the experience and we can program what goes across the street.”

“That property will add value and help us because, when this originally got started, I think the franchise fee was at one point closer to $100 million and when we walked in it was $150 million and it ended up being $200 million as MLS got more and more popular and more and more people were trying to get franchises,” he said. “At the same time, the stadiums were getting more expensive.”

Steinberg said he expects the Burkle group to develop the ancillary site, along Seventh Street, sooner than later for the same reason the Kings moved quickly to build its hotel and condominium tower next to the arena. In the case of Downtown Commons near Golden 1 Center, it broadened the company’s financial footprint, making the Kings less reliant on in-arena revenues.

Map of proposed stadium site

The proposed soccer stadium is one of several projects planned for the 240-acre former railyard:
1. Kaiser hospital
2. Soccer stadium
3. County courthouse
4. Revolve housing project
5. Foundary office project
6. Affordable housing complex
Map: Nathaniel Levine

The Sacramento City Council has agreed to a $33 million incentive package of fee waivers, traffic control, signage rights and infrastructure assistance to help the Burkle group move quickly on developing the 17 adjacent acres. That includes setting up a financing district in the railyard that will tap future increased property taxes to reimburse the Burkle group for an estimated $27 million in new streets, sewers and other basic infrastructure.

The mayor said he will propose the City Council amend that package to make $27 million an upfront loan that Burkle will pay back with interest. The goal, Steinberg said, is to offer Burkle more cash and financial flexibility as he launches his project.

Craig Powell, a local activist on tax issues with the Eye On Sacramento watchdog group, has challenged the city for financially assisting a billionaire. But Steinberg said he sees the incentive package as a fair deal in main part because it helps spur development beyond the stadium at a key moment in the railyard’s modernization process.

“We help with infrastructure and in exchange we get Major League Soccer and over $1 billion in overall investment,” Steinberg said. “This is the spark that we have needed to take railyard development to another level.”

Burkle could build a hotel in Sacramento

Burkle is a major investor in upscale hotel chains, and the site would be perfect for a hotel, said Lloyd Greif, a Los Angeles investment banker who’s known Burkle for years. “There’s an opportunity for him to make a killing on the real estate,” Greif said.

But Burkle has a history of being deliberate. In Pittsburgh, where Burkle owns the Penguins of the National Hockey League, officials gave him rights to 28 acres of land in 2007 surrounding the team’s old arena. Burkle built a hotel, but the rest of the land remains untouched. Recently, the Penguins hired a prominent redevelopment official amid signs the team wants to jump-start construction.

“It’s been extremely frustrating over the years,” Daniel Lavelle, the city councilman who represents the site, told The Bee earlier this year. “Ten years later, finally, I do believe we’re going to see development begin to happen.”

While Burkle’s group now steps onto the east end of the railyard, LDK is focused on the northwest end. Denton Kelley said his company hopes to build 200 housing units a year over the next five years, if there is a sustained housing market in Sacramento during that time.

The LDK development group also will prepare the site’s historic central shops buildings for reuse. The huge vaulted brick buildings are some of the most architecturally striking structures in the Sacramento region, noticeable from nearby Interstate 5, and represent a core element of the city’s history. But they require extensive retrofitting.

“They are a blessing and curse, the yin and the yang of the development,” Kelley said. “Such is the nature of historical adaptive reuse.”

When transformed, they will serve as the railyard’s central gathering spot, even more than the stadium. Kelley said he wants to land an entertainment venue there to act as a magnet for other shops, restaurants and housing.

“The buildings really are what the whole project takes its cue from,” Kelley said. “The culture and the vibe. It’s really the roots of the project.”

The State of California plans to turn two of the shops buildings into a hands-on transportation and technology exhibit.

It’s been a long haul since the early 1990s, when the Union Pacific Railroad shut down its operations at the shops and in the yard, and the city announced it was time to turn the railyard into a modern addition to downtown.

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A 1989 aerial photograph shows the downtown railyard a few years before Union Pacific shutdown its operations in the shops and the yard. Sacramento Bee file

The railyard, said to be the largest infill development site west of the Mississippi River, has required large amounts of government funding and work to get to this point. More than $300 million already has been poured into the area the past 20 years to clean toxic waste.

That money has come from state and federal grants, and some city money. It included funding to build two bridges that carry Fifth and Sixth streets over the rail tracks, connecting the site to downtown.

LDK Ventures, which built Stanford Ranch in Roseville and turned McClellan Air Force Base into a business park, bought most of the railyard in 2015 after the previous owner went bankrupt.

Now they are joined by Burkle and his group. For his part, Burkle said he sees Sacramento as undervalued, and feels his timing is good both to invest in Sacramento and in national soccer.

“It seems to me a place that doesn’t get as much credit as it should and is a bigger opportunity,” he said. “Lay that into where soccer is in its growth cycle, so it just seemed like a good opportunity.

“We feel it is the right time and the right place to be.”

Sacramento Bee reporter Dale Kasler contributed to this article.

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Tony Bizjak has been reporting for The Bee for 30 years. He covers transportation, housing and development and previously was the paper’s City Hall beat reporter.
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