Ethan Conrad makes second recent Downtown Sacramento purchase with 770 L Street.

By Ben van der Meer – Senior Reporter, Sacramento Business Journal

Real estate investor Ethan Conrad has made a second investment in Downtown Sacramento, announcing Friday he’d purchased 13-story office building 770 L St.

Conrad said in an email that he believed with some pending leases, he’ll be able to boost current occupancy in the building beyond its current 75%, a figure he described as strong in the current market.

“Historically, this building has had high occupancy and is a property that the tenants love, but the occupancy declined a bit over the last couple of years because the previous owners weren’t able to perform tenant improvements or spend any significant amount of money, based on issues with the existing lender and the fact that there was more owed on the property than the fair market value,” Conrad said in an announcement email to his staff at Ethan Conrad Properties Inc., shared with the Business Journal.

Conrad said he paid $22.5 million for the 170,000-square-foot building in a short sale. New York Life Insurance Company was the previous owner and Wells Fargo Bank was the lender. Conrad’s description suggests the property was sold for less than its loan amount as a way to avoid potential foreclosure.

New York Life bought the building in 2018 for $44.5 million, meaning it lost nearly half its value in the last six years. Records do not indicate the loan was in current trouble.

Emails sent Friday evening to press representatives for New York Life were not immediately returned.

Conrad said he plans to make improvements to take the building from what he called a “7” currently to a “9.5” on a scale of 1 to 10, to reflect pride of ownership. A team will meet at the building this weekend to discuss remodeling plans in detail, he said.

In his email to his staff, Conrad said during escrow he learned the building’s primary tenant, the California High-Speed Rail Authority, plans to renew its lease. Overall occupancy improved from 66% to over 70% during escrow with a new 7,000-square-foot lease to a law firm, and two more pending leases will take occupancy over 75%, he said.

“I think that there definitely are ‘flight to quality’ office buildings downtown and in the suburbs. Therefore that is the key to successful office buildings,” Conrad said. “As far as the office building that I think will continue to have higher vacancy rates, are the older buildings that need to be remodeled and/or have a lot of antiquated features or appearances that no one wants for which the expenses are often equal to or higher than more modern buildings.”

In July, Conrad bought 630 K St., an office and retail building near the Downtown Commons retail and entertainment district. He said he plans to convert that building fully for retail use, and announced a new lease earlier this month for Con Azucar Café, a Mexican-themed coffee shop, for the first floor.