Here Comes the Neighborhood

Area infill projects forge ahead

Back Longreads Nov 1, 2010 By Adam Weintraub

If everything goes as planned, the newest phase of the K Street redevelopment effort will open for business late next month off 10th Street, bringing a pizza place, dance club and  “dive bar” stocked with costumed mermaids and mermen to the downtown mix.

Those fish-tailed swimmers in the saltwater tank near 10th and K streets will be just the first of the new faces in the neighborhood. At least five major projects — at stages of development from “imminent” to “who knows?” — are on tap in or near downtown Sacramento with the potential to transform the area.

Within two years, the west end of K Street could be home to the largest single addition of housing downtown in years, with more than 250 new apartments planned for projects in the 700 and 800 blocks of the strip. That’s the most at once since CIM Group’s 225-unit 800 J Lofts began leasing in 2006, and “before that the last was Riverview Plaza in the late ’80s,” says Leslie Fritzsche, downtown development manager for the city of Sacramento.

The two blocks of K Street have different proposals, developers and timelines. Each developer has been granted an “exclusive right to negotiate” by the Sacramento City Council and have started firming up the details of design, financing, tax subsidies and timing. The effort on the 700 block of K could start construction by late next year and be complete as early as 2012.

The K Street projects, along with the 800 J Lofts, would put close to 1,000 residents in the heart of downtown Sacramento, a concentration long seen as a catalyst to revitalize the city core.

Even bigger residential plans in the area are slowly moving forward, though not without bumps in the road.

The most ambitious project is also the most uncertain at the moment, with Thomas Enterprises Inc. losing the 240-acre railyard redevelopment site just north of downtown to a creditor at auction late in October. Initial work has started on roads in the former Union Pacific yard and relocating the train tracks would be next. City officials hope the new owner, Inland American Real Estate, will continue the project. The Thomas Enterprises plan was to add some 12,000 residences, along with retail, offices and entertainment, including the elusive and recurring notion of a new arena where the Sacramento Kings would play.

Not far away, site preparation has started at the 65-acre Township 9 site in the River District along the American River while the developers work out plans for an initial 180 affordable apartments. Long-term plans call for a first phase of about 750 housing units and eventually more than 2,300 units, along with neighborhood retail and other space. A Regional Transit light-rail station on the new Green Line, once planned to open late this year, is expected by mid-2011, and as of October the developers were working on a bid for improvements on North 7th Street.

Across the Sacramento River, construction has started in the Bridge District near Raley Field in West Sacramento with street and bridge work, parks and some utilities set for completion next year. More than 700 housing units of various types are expected to be in place by 2014 with the potential for more than 5,200 units as the area is built out over the years. The first wave is expected to include “a mix of affordable housing, both for sale and rental, and also some market-rate,” says Charline Hamilton, development services manager for West Sacramento.

Those large-scale projects will take years, and the state of the market and availability of financing can change a lot in a short time. The most immediate focus is on K Street.

Nightclub operator George Karpaty is working with CIM and David S. Taylor Interests on the mermaid bar, over-30 dance club and pizza restaurant in the 1000 block of K Street. The City Council in October gave CIM, Taylor and Domus Development of San Francisco exclusive rights to assemble a detailed plan for the 800 block of K and the area to the south.

Potentially first out of the gate is the 700 K proposal, now taking shape as Bay Miry, Ali Youssefi and their compatriots explore the cluster of storefronts they hope to use as the heart of a new western anchor on the long-blighted K Street Mall.

“This is a project that we want to start now,” says Youssefi, a vice president with CFY Development Inc. of Sacramento, a multifamily housing developer with a history of reusing and preserving historic sites such as the Globe Mills and the Stockton Hotel. “We realize the urgency that everybody feels.”

“We feel really strongly about the potential of this site, and that’s why we’re investing all our time and money and energy,” says Miry, of D&S Development Inc. “And our dads’ time and money and energy,” he adds. He’s half-joking about Cyrus Youssefi and David Miry, but the joke acknowledges that both of the point men on 700 K grew up in the business and bring a homegrown Sacramento perspective to the project. D&S has been behind the Old Sac iLofts condo and retail project in the former Mechanics Exchange building; the mixed-use development at 14th and R that includes the Shady Lady restaurant and bar and 13 for-sale lofts; and owns and operates the Sterling Hotel.

Miry and Youssefi, Kuchman Architects and the other members of the development team pitched a proposal that preserves the retail face and historic elements of K Street but lops off the inefficient back of the long, narrow stores. It replaces the rear of the stores with apartments and parking facing the alley and adds more housing above the stores. “I think what separated us was the balance between being doable and being bold,” Miry says. “We weren’t talking about tearing everything down and building skyscrapers. … We think it’s very financeable.”

The K Street projects, along with the 800J Lofts, would put close to 1,000 residents in the heart of downtown, a concentration long seen as a catalyst to revitalize the city core.

Once the city approved their exclusive right to negotiate, the plans started to shift, mainly because they got a set of keys and began exploring the site. “We go to a basement we didn’t even know existed the week before — because we didn’t know how to get into it — and realize, ‘Wow, this could be a really cool basement lounge,’” Miry says.

That’s how they arrived at the notion of converting the historic building at 700 K Street that most recently held a Men’s Wearhouse into a music venue that could hold 500 to 800 patrons. A music venue had always been part of their plans, but when they got inside the store they saw the old posters of men in tuxedos around the upper level, looking down to the former sales floor as if they were spectators at a show. It sparked an idea — what if you knocked out the wall to the former Joe Sun & Co. shop next door, replaced some support columns with roof trusses and added a tiered balcony? “The stage would go right about where the dressing rooms are now,” Miry says.

The developers are similarly tweaking their plans for housing — they now envision about 150 apartments, mostly studios and one-bedrooms aimed at tenants with “moderate” income of $40,000 to $50,000 a year — and talking with retail prospects from earlier projects who have expressed interest in the new site. Those tweaks will firm up financing talks, both on city subsidies and on bank loans, but Miry and Youssefi are confident. “The city is as motivated as we are to make something happen here,” Youssefi says.

Just behind on the development curve is David S. Taylor, president of the eponymous development company with a long history of office and hotel projects in Sacramento, including the Sheraton Grand and the US Bank Tower at 621 Capitol Mall.

That timing suits Taylor just fine. He originally was part of proposals for both the 700 and 800 blocks, and when the CFY/D&S group was selected, he had concerns about a possible glut of apartments if they all hit the market at the same time. Now, he says, it looks like the Taylor/CIM/Domus project would start construction no sooner than autumn 2011 and not hit the market before mid-2013, allowing time for the space to be absorbed.

The Taylor/CIM proposal calls for around 60 market-rate apartments along K Street on a now vacant site on the southeast corner of 8th and K, and 60 to 65 affordable units oriented to L Street, incorporating and redeveloping the historic Bel-Vue Apartments building. “We’re in the very early stages of defining exactly what the project is,” Taylor says, which includes the possibility of adding 20 apartments and possibly working with the 700 K team to jointly market retail space.

The time is right for K Street, Taylor says, because the city used its power to assemble blocks of land that had been held by numerous small owners “who assumed they’d get the kind of prices you’d get for an office building.” Also crucial is the city’s financial support and tax credits for affordable housing, he says. “Both of our projects assume that the city is providing land to us, at least at first.” Taylor says his firm and CIM would supply equity for the market-rate construction, and he expects to tap into a multimillion-dollar fund resulting from the city’s sale of the Sheraton Grand, profits that are to be plowed back into redevelopment.

Both development groups must go back to the city with detailed plans to win approval to move forward on K Street, but neither sees much immediate competitive threat from the railyard, Township 9 or Bridge District, all of which have tapped into state bond money that has been slow to flow. “I see our project and Taylor’s hitting the market well before the railyard or Township 9,” Miry says.

“There’s always going to be competition,” says Steve Goodwin, one of the partners behind Township 9. But he sees K Street as a different residential market with a different customer than his project. “To some degree it’s an all-boats-rise situation. … A true marketplace gives people options.” Some people may want the downtown entertainment vibe, he says, while others may want ready access to the American River and its bike trail, a short light-rail ride from downtown. “We’re looking to bring the river to the city and the city to the river.”

That’s a much more wide-open task than redeveloping a couple of downtown blocks. Goodwin likened Township 9 to a master-planned development that would be built out over 10 to 12 years but with more flexibility as to the types of construction within the broader project. “They start off a little slow, but they acquire momentum,” Goodwin says. “For a while, everybody thinks you’re a ding-dong; now, we’re starting to get some buy in.”

Demolition of the Tri Valley Growers cannery at North 7th and Richards Boulevard and other structures began this year, and a contract should be cut soon to develop 7th Street into a “promenade.” Design work has begun with St. Anton Partners on the first new housing at the site, 180 affordable units expected by late next year. “We’re starting to kind of noodle about what the next project will be after that,” Goodwin says. Because the area has been mostly industrial, he says, it needs neighborhood retail that is unlikely to compete with the retail of other developments.

No one at Thomas Enterprises returned calls for this story; Thomas has been embroiled in legal fights with former partners and lender Inland American Real Estate that some said would force the railyard project into bankruptcy. Inland took over the site Oct. 22 through a foreclosure auction.

Fritzsche, from the city economic development office, in October called the situation “a time of flux but also a time of great opportunity.” Before the court fight heated up, she said, “if we do wind up working with Inland, they have expressed a strong interest in going forward” with the project, but that â?¨likely would delay development.

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