Developer looks to up investment in K Street's future
Sacramento Business Journal - By Michael Shaw
June 22, 2007
Trancas Ventures is converting this building at 10th and K streets into office condos.
View Larger Private investment could provide a much-needed spark to K Street.
Trancas Ventures Inc., the Napa-based developer that owns two office buildings on K Street and is under contract to buy the Crest Theatre, is looking to purchase more property, city officials said this week.
Trancas, which has reworked areas of San Francisco and San Diego, hasn't asked for city funding and isn't sitting on properties in hope of a big payoff, city officials say.
It's gutting an empty six-story office building at 1001 K St., marketing the floors as office condominiums, building a ground-floor restaurant, and plans to do the same with another office building it owns at 818 K St. after a state tenant moves this fall.
Trancas is expected to close on the Crest Theatre purchase in August, said Greg Levi, a senior vice president with CB Richard Ellis, the listing agent for Trancas' office buildings.
Jim Brennan, president of Trancas, has asked Levi to field questions about the company's properties, though the broker declined to talk about the group's future intentions on K Street.
The city of Sacramento has put about $20 million in public funds into the faded pedestrian thoroughfare by acquiring property at above-market prices and striking deals for upscale retail, entertainment and condo projects.
Yet its most ambitious plans -- those for the 700 and 800 blocks -- stalled after one group of developers rejected a land-swapping deal, prompting the city to sue to enforce it. That suit is still pending.
Trancas' plans, which so far have come with no strings attached, have been welcomed.
"They bring private capital to the table," said Leslie Fritzsche, downtown district manager for the Sacramento Regional Housing Authority. "They haven't asked us for anything."
"We need more of that," said Michael Ault, executive director of the Downtown Sacramento Partnership. "What downtown doesn't need is people buying property and sitting on it."
Trancas can proceed because the market for owner-occupied office space near the Capitol is hot, Levi said, whereas homes, shopping and entertainment might need incentives to locate on K Street.
Trancas bought the 47,000-square-foot former Roos Atkins department store at 1001 K St. in December from St. Anton Partners and Cordano Co. The building once housed the headquarters of former Assembly Speaker Willie Brown.
The company is planning to add more windows to the facade and redesign a deck on the sixth floor, Levi said.
Exteriors will be architecturally consistent with the development across the street to the south, where David Taylor and CIM Group Inc. are building a home for the California Musical Theatre. That project required a $5.75 million city subsidy and eventual transfer of ownership to the developers, though the city will receive proceeds from ticket sales as a return on its investment. Taylor and CIM have proposed a condo development next door to the theater, and they're going through the environmental review process now, Fritzsche said.
The five-story building at 818 K St. that Trancas bought in late 2005 is home to the California Office of Statewide Health Planning and Development until this fall. Levi said lobbyists and associations have expressed interest in both properties, mainly for the proximity to the Capitol.
When the big K Street land-swapping deal was struck last fall between Joe Zeiden, co-owner of the Z Gallerie furniture stores, and a development group including Mohammed "Moe" Mohanna, city leaders said it was important that the K Street revitalization begin at the root of the problem, the 700 and 800 blocks. With plans there halted, revitalization seems to be happening in the other direction, from the east, Levi said.
Mohanna and his partners are accused in a lawsuit filed by the city of breaking the deal that would swap properties along the 700 and 800 blocks with Zeiden and allow development to move forward.
In the past few weeks, the city has turned up the heat on Mohanna, filing legal notices that alert potential buyers or tenants that the properties are subject to a lawsuit.
"We cannot get financing, we cannot get tenants, we cannot sell, we cannot do anything on the 700 block," because of the notices, Mohanna said. His attorneys are fighting them, he said. Mohanna has fired back, accusing the city of wasting money by moving a light-rail transit station from K Street to 7th Street to accommodate Zeiden's store and questioning the Downtown Sacramento Partnership's approval of that move.
Mohanna, meanwhile, is still a member of the partnership, and there has been friction between him and others on the board who blame him for the delays.
Fritzsche said the city is still negotiating outside of court in an attempt to resolve the dispute. Meanwhile, the city has initiated a streetscape improvement that will give the walkway new pavement, benches and trash receptacles.
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