By Jon Peterson
Sacramento-based Ethan Conrad Properties has closed on the acquisition of the 157,372 square-foot Harvard Square office building in Sacramento located at 2180 Harvard Street. The purchase price on the transaction was $22.5 million, or just under $143 per square foot, according to information provided in public records.
The seller of the property was San Jose-based Insight Realty Company. The seller had first placed the property on the market for sale in the late summer of 2021, and the asking price was $26.8 million, according to the property’s offering document. The going-in cap rate on this transaction was projected to be around 7.7 percent.
The seller of the asset had been represented in the transaction by the Sacramento office of CBRE. The lead person involved with the sale was Randy Getz, an executive vice president with the company. Insight Realty had been the owner of the property since 2016 when it paid $18.4 million for the office asset.
The property has seen a sizable drop in occupancy since it was placed on the market last year. In August 2021, the property was 88 percent leased. When the property was sold, its occupancy had dropped to around 60 percent. Occupancy could pick up going forward, according to some estimates, since Sacramento is not seeing a lot of new Class A assets under development.
The sale of the property represents a transaction that comes in at well below replacement cost. The purchase by Ethan Conrad comes in at $143 per square foot, and industry sources estimate replacement cost to be in excess of $350 per square foot.
Harvard Square is considered to be a Class A suburban office building that is located approximately four miles northeast of the central business district of Sacramento. When the property was up for sale last year, it had a total of 18 tenants in the building that occupied an average of 7,500 square feet.
Most of the tenants during that time period were credit tenants and made up 93 percent of the occupied space. All of the tenants continued to pay full rent through the outbreak of the pandemic. Insurance and finance companies lease a total of 41,985 square feet in the property. These tenants include American Contractors Indemnity, Liberty Mutual Insurance and Alliant Insurance.
There were also a number of government tenants in the property last year. These totaled 37,329 square feet and included entities such as the Department of Industrial Relations, Cal Fire and Farm Credit Administration. One other large tenant was Molina Healthcare, which has a lease for 24,333 square feet.
Harvard Square represents one of a limited number of suburban office properties in the Sacramento market that has a multi-level parking structure. Employees of tenants in the property do have the option of paying $35 per month for an assigned parking spot.