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US.F. office landlord buys tower on J Street
By Bob Walter - The Sacramento Bee
January 11, 2003 - U.S. Bank Plaza became the second-most-expensive building ever sold in the Sacramento area on Friday when the Shorenstein Co. of San Francisco bought it for a reported $112.5 million.
The 25-story office tower sits at Ninth and J streets, across from Cesar Chavez Park and cater-corner from City Hall. In addition to US Bancorp, major tenants include Investors Bank and Trust and the California Department of Managed Healthcare.
The deal represents the first investment in the capital for Shorenstein, a major national real estate firm that has been a fixture in the Bay Area since the 1920s and is the biggest office landlord in downtown San Francisco.
With the Bay Area office market slumping sharply since the dot-com implosion -- vacancies more than 20 percent in most areas -- Shorenstein is one of many developers and investors looking elsewhere.
Shorenstein paid a reported $750 million last year for major office towers in New York, Chicago and Philadelphia. The New York property, which reportedly cost $300 million, is 450 Lexington Ave., a 32-story complex across from Grand Central Station.
Overall, Shorenstein controls more than 22 million square feet of office buildings nationwide. More than 6 million feet of those holdings are in San Francisco.
"Shorenstein coming here is a good sign because the company has such a great reputation in San Francisco," said Robert D. Dean, senior vice president and district manager of Grubb & Ellis commercial brokerage in Sacramento.
"It reinforces the idea that if you own properties in San Francisco, you are looking to own properties elsewhere," he said, "and Sacramento is high on the radar screen."
The U.S. Bank Plaza sale also continues a national trend -- which managed to elude Sacramento -- that saw investment money pour into office buildings and regional malls in the fourth quarter of 2002, according to a survey by PricewaterhouseCoopers LLP.
In the capital, office building sales were rare in 2002 and almost nonexistent toward the end of the year, but it wasn't for a shortage of buyers, said Bill Palmer, investment specialist and senior vice president at CB Richard Ellis in Sacramento.
Palmer said there was plenty of investment money looking for a home in Sacramento's mostly stable office market. But few owners were willing to sell, he said, because there was no place to put the money for a better return.
U.S. Bank Plaza was developed in 1991, as part of a project that included expansion of the central library next door, by a partnership that included McCuen Properties of Sacramento and the Grosvenor group. Grosvenor, a global development and investment firm, was the seller in the deal that closed Friday.
The bank plaza was Grosvenor's only property in the capital. Mark Preston, president of Grosvenor USA Limited, said Friday that the firm is focusing on markets where it has more critical mass.
Douglas Shorenstein, chairman and CEO of Shorenstein Co., said his company prides itself "on identifying high-quality assets in markets with strong potential ... We think U.S. Bank Plaza will be a strong addition to our national portfolio."
Chris Curtis, a Shorenstein senior vice president, will handle leasing at the 95 percent-leased bank plaza. He said Shorenstein Co. was happy to be entering the Sacramento market.
"It's a great market and a beautiful building," he said Friday.
Curtis said Shorenstein had no other investment or development deals working in the capital region, but said the company "always is looking for properties as good as this one."
Terms of the deal were not revealed, but industry sources said Shorenstein paid about $112.5 million for the 440,000-square-foot tower. That would represent the highest price for a building in Sacramento since Wells Fargo Center on Capitol Mall was sold for about $130 million to Cornerstone Properties of New York in January 2000.
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