New life for West Sac infill project
River's Side sells, but Signature bails
By Michael Shaw of the Sacramento Business Journal
Friday, November 16, 2007
There may be new life for a prominent West Sacramento infill project, while another that was expected to transform a derelict neighborhood near Raley Field has been dropped by the developer.
An attempt to sell River's Side at Washington Square homes at auction in September failed when bids came in much lower than reserve prices.
River's Side at Washington Square, which became a casualty of the housing slump when it failed to attract many individual buyers on the open market, has been sold to a partnership that includes midtown developer Sotiris Kolokotronis.
John Leonard, president of Leonard Development Co. and the developer of River's Side, declined to discuss terms of the deal, though he did admit to losing a significant amount of money on the project.
River's Side is a lauded collection of modern, podium-style homes on a half-block near the West Sacramento riverfront. Just three of the 25 homes sold over the past year.
Kolokotronis said the new owners, a partnership of four investors, may decide to rent the homes in the short-term, but they bought the project because of its long-term chance of success within a transforming riverfront district.
"We really like the project," he said. "It's a great location, and it's very well-built."
He said the completion of the California State Teachers' Retirement System nearby bodes well for the residential project.
Leonard and Kolokotronis are partners in the Fremont mixed-use building in downtown Sacramento.
Meanwhile, Signature Properties has dropped its project at Raley's Landing in West Sacramento. After making adjustments to its plans during the housing downturn, the company had proposed building 134 brownstone-like homes on half of the land it optioned, which is owned by Raley's and the Teel Family Trust.
David Nybo, director of land acquisition and forward planning for Signature, said the housing slump played a role in the project's demise, but the major factor was a disagreement over the inclusion of affordable-housing units. West Sacramento requires 15 percent of housing in redevelopment areas such as Raley's Landing to be priced so that below-median income earners can afford it.
"They didn't want to work with us on that," Nybo said. "It made it difficult, if not impossible, to make (the project) work."
Signature had initially announced 550 homes and retail space for the 7-acre property, which had been called "Washington Street." The property is located on West Capitol Avenue and is being used as a parking lot. The company is now concentrating on projects up and running, such as the 5,200-home Fiddyment Farm development in west Roseville.
This year has been an "arduous journey" for Leonard, the developer and former owner of River's Side. A year ago, Leonard was accepting an award after a group judged it to be the best emerging infill project in the Sacramento area as one of the Business Journal's projects of the year. Now, he's relieved to be out from under the debt.
Leonard branched out from commercial real estate to create what he considered a pet project.
"Historically, I've been involved in commercial projects -- office, retail -- this was me straying from my normal path," he said.
Leonard Development Co. had built the Jackson Laboratories West Coast headquarters in West Sacramento and other build-to-suit projects.
Leonard said he didn't want the project falling into default or foreclosure, regardless of personal sacrifices.
"We paid the bank in full," he said, referring to Irwin Union Bank of Columbus, Ind., which had provided the construction loan for the project. "I think everyone is pleased with the outcome."
An attempt to sell the homes at auction in September failed when bids came in much lower than reserve prices, leading Irwin Union to void 20 sales. The homes had listed between $405,000 and $460,000 but went for about $275,000 at auction,
"I'm very proud of it," Leonard said of River's Side, adding that he would build houses again if the market was right. "I got caught in a bad market and kept my word to the bank. ... You do these things and it's part of the risk of real estate."
Nybo said he was impressed with Leonard's decision to assume all the risk.
"It's not uncommon for subcontractors to be hung out for millions of dollars," he said. "But John paid everyone off, even though he's losing money on the deal."
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