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Underdog may win Sacramento tower
The California capital's normally staid market for office real estate is heating up.
By Jonathan Berke - The Daily Deal
December 19, 2002 - Call them celebrity buildings or trophy buildings.
As California's capital, Sacramento is the political center of activity in
the largest state in the union and has a physical layout that resembles
Washington, D.C.
Now its real estate market is also taking on some of the characteristics of
the nation's capital.
San Francisco real estate magnate Douglas Shorenstein has emerged as the
favorite to acquire the U.S. Bank Plaza office tower in Sacramento from
London-based developer Grosvenor Group, according to a source.
Shorenstein's company, Shorenstein Cos., had lost out on the auction to
Boston's Charlesbank Capital Partners LLC and others. But sources close to that
deal said Charlesbank has bowed out, despite offering a bid the Sacramento Bee
reported to be $107 million.
A Charlesbank spokeswoman acknowledged her company's interest but would not
comment further. Shorenstein declined comment.
Hotly contested real estate auctions are common in Washington, where office
buildings change hands frequently. But the market in Sacramento is fairly
static.
U.S. Bank Plaza, however, has changed that situation. Now 97% occupied by
financial institutions and government agencies at rents of about $34 per square
foot, the tower is considered among the top five office buildings in town,
according to sources knowledgeable about the Sacramento market.
With a "mall" area that has the state Capitol at one end and streets denoted
by numbers or letters, downtown Sacramento has taken on a Washington likeness.
But industry bankers say the only major sale in recent years there has been
Equity Office Properties Trust's acquisition of the Wells Fargo Center as part
of its $4.6 billion purchase of Cornerstone Properties in early 2000.
Privately held Grosvenor, which manages L 2 billion ($3.2 billion) in real
estate assets globally, has owned U.S. Bank Plaza since 1991, but Lehman
Brothers Inc. began marketing the tower to bidders earlier this fall.
Media reports had pegged a joint venture between Charlesbank and San
Francisco's McCarthy Cook & Co. as the frontrunner to win the auction. Chicago's
Walton Street Capital and Equity Office were also mentioned as possible bidders.
But Shorenstein Co. is the one bidder still standing as others have dropped
out.
" Shorenstein is often a lot closer to the right number than the bidders
above him," says a source close to the situation, "and most times, the deal will
come to him."
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