Ethan Conrad buys former Health Net office building in Gold River
See Correction/Clarification at the end of this article.
Zigging while others zag, real estate investor Ethan Conrad said he’s making a long-term bet in his latest targets for acquisition: office buildings.
The Sacramento-based head of Ethan Conrad Properties Inc. closed escrow this week on the Class A office building at 11971 Foundation Place in Gold River, currently completely vacant.
“Agreed, this is really a bet on the future,” he said in an email. “Although, it is notable that we are doing a number of office deals currently. We’ve actually leased more office space this year to date than we had last year.”
Built in 2002, the three-story, 150,000-square-foot building requires no remodeling and only slight cleanup, Conrad wrote in an email to staff announcing the purchase, which he shared with the Business Journal.
Conrad said he paid about $57 a square for 11971 Foundation Place, or about $8.55 million. That’s about 20% of what it would cost to build something similar, he said, and such a building would normally sell for $180 to $220 per square foot.
Until the last few years, Health Net occupied most, if not all, of the building as its local headquarters. It’s not immediately clear when the health insurance provider, an arm of Centene Corp. (NYSE: CNC), departed the building, or if it occupied another spot elsewhere. The company did not immediately respond to an inquiry Friday, though it still listed Foundation Place as its local hub as recently as 2021.
Centene, however, has at least locally gone to remote work, leaving behind a sizable North Natomas office building built in the last few years specifically for the company.
A leasing brochure for the building from CBRE and previous owner Griffin Realty Trust mentions amenities at 11971 Foundation Place such as ample parking, a fitness center and the ability to divide it into spaces of 25,000 square feet.
Griffin Realty Trust, which has since changed its name to Peakstone Realty Trust (NYSE: PKST), is a real estate investment trust that specializes in single-tenant commercial properties.
Records show the building most recently sold in August 2020 for $14.3 million, suggesting a value reduction of about 40% in three years. A message left with Peakstone Friday was not returned.
But Conrad said in his email to his staff that 11971 Foundation is probably the nicest office building in his portfolio. And he said separately he’s more confident in the office market in inland Northern California than in the Bay Area or Los Angeles, which he believes may never fully recover.
Compared to the Sacramento region, both of those areas saw significant new office development in the last decade, meaning they’d cater to high-profile firms, especially in tech, that have now pivoted to hybrid work schedules that require less office space.
Palmer Capital Inc. brokered the sale, which closed Wednesday.
Correction/Clarification
This article has been corrected to note that Palmer Capital Inc. brokered the sale of the building.
