CalPERS is ready to put up to $550 million into a long-vacant site on Capitol Mall, aiming to build what would become the tallest office tower in Sacramento.
But that doesn’t mean a new crane is coming soon to the banks of the Sacramento River to get started on construction.
CalPERS and developer CIM Group still need to line up a marquee tenant before they can break ground on a project that would finally fill Sacramento’s “hole in the ground” by the Tower Bridge.
CalPERS and CIM on Sunday released their latest proposal, outlining a 550-foot-tall tower that would be about 120 feet taller than the nearby Wells Fargo Center.
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It’s a larger structure than the one that CIM planned two years ago, when CIM unveiled conceptual drawings for a mixed-use building that incorporated downtown housing and office space.
The new designs still call for about 100 apartments in addition to 737,000 square feet of office space. They also call for an elevated public park and some retail space.
“We believe the updated design better addresses the needs of Sacramento, and therefore is well-positioned to generate better returns. Now we have a commitment for the investment, we can advance on the drawings and launch our leasing efforts. Before it was conceptual without the capital commitment to move forward,” said Avi Shemesh, co-founder and principal of CIM.
The CalPERS Board of Administration in July during a closed session meeting voted to move forward with the newest plan. CalPERS has not disclosed how board members voted.
CIM already has shown the proposal to city leaders, who are eager to see progress on the site.
“This is a crucial piece of land at Sacramento’s front door, and it’s great news that CalPERS is moving forward with a project that is both architecturally distinctive and contains a mix of housing, office and retail that will add to our city’s economic vitality. We look forward to working with CalPERS to bring it to fruition,” Sacramento Mayor Darrell Steinberg said in a written statement.
The site has proved troublesome for CalPERS since the recession. The pension fund in 2007 pulled the plug on a plan that would have built twin 53-story condo towers on Capitol Mall. This site has been vacant since then.
CalPERS spokesman Brad Pacheco said “we’ve had a longstanding relationship with the city as well as CIM. We want to honor our commitment to the city to create something that is an iconic project.”
Now, Shemesh said, demand is growing for modern, Class A office space in Sacramento and the project is nearing a point when it will be viable.
Randy Getz, a Sacramento office real estate broker, said vacancy rates in the city are decreasing, suggesting that demand is growing
“I don’t know if we have the need for 700,000 square feet of office space today, but I do see the need long term,” he said. “We’re just about out of Class A office space in premium buildings.”
Shemesh on Sunday was not ready to offer a timeline for when the project might be built. In 2016, he told The Sacramento Bee that it could have broken ground as early as 2018, this year.
The CalPERS vote earlier this summer commits to releasing money as CIM reaches certain milestones, such as finding a tenant.
Barry Broome, president of the Greater Sacramento Economic Council, said CalPERS might have to spend some money soon to prepare the site. A business would expect to have space ready within 18 months if it wanted to sign a lease.
He believes CIM will be able to find a tenant, adding that a couple of large corporations recently passed on locating here because of a shortage of modern Class A office space downtown.
“You can’t expect CalPERS to put a $500 million spec building into the marketplace, but they are going to have to spend a few million dollars on the pre-development side if they’re ready,” he said.