Park Tower Park Tower islocated at 980 9th St. and 1010 8th St., a short walk from theCalifornia state capitol.

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SACRAMENTO—Park Tower, a 489,171-square-foot class-A downtownoffice building, was recently acquired for a commanding $165.5million by Prime US REIT. As one of the tallest buildings inSacramento, the office asset consists of 24 stories of officespace, retail and parking garage space.

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KBS serves as the US-based asset manager for the portfolio whichincluded identifying and sourcing this asset on behalf of theportfolio.

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"This is the first new acquisition for the portfolio sincelisting 11 properties on the Singapore Exchange last year," saysRod Richerson, KBS regional president for the Western UnitedStates. "Acquiring Park Tower is a strategic investment into aprime location and a premier asset. At 92% occupancy, Park Tower isone of the top five buildings in the downtown Sacramento marketwith strong in-place cash flow and a diverse base of credittenants."

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Park Tower is located at 980 9th St. and 1010 8th St. The assetis within walking distance of the state capitol building; DowntownCommon, a newly developed mixed-use entertainment and shoppingcomplex with 670,000 square feet of retail and entertainment;downtown's retail and entertainment core, and Golden 1 Center, theSacramento Kings' basketball arena.

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"The $165.5 million purchase price was a high number because thebuilding is one of the larger towers in downtown Sacramento," BrentCarroll, senior vice president for KBS, tells GlobeSt.com. "On aprice-per-square basis, our purchase price was actually lower thanthe last class-A building sold which was 400 Capital Mall. Inaddition, Park Tower is an icon in the downtown Sacramento market.It is a 24-story office and retail tower with parking that is abovemarket standards, encompassing 489,171 square feet in the heart ofa flourishing California city. The tower is also within walkingdistance of some of Sacramento's most significant government,retail and entertainment destinations. In short, it is one of thetop-tier office assets in downtown Sacramento."

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Park Tower is also near 60,000 undergraduate students at UCDavis and Sacramento State University. A 15-minute drive toSacramento International Airport and 90-minute drive to SanFrancisco, the property has access to major freeways, trains andthe downtown Sacramento light rail system as well as Napa Valleyand Lake Tahoe.

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Grant Lammersen, Steve Golubchik and Tyler Myerdirk of NewmarkKnight Frank brokered the transaction.

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"In identifying Park Tower for Prime, KBS has leveraged its deepunderstanding of the outstanding market fundamentals to purchaseone of the premier office towers in the downtown Sacramentomarket," says Lammersen.

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Bruce Fischer, Christine Fan and Howard Chu of global law firmGreenberg Traurig's Orange County office represented Prime as legalcounsel in the acquisition.

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According to state figures, government jobs make up 26% ofSacramento county's total wage and salary employment. And,Sacramento's expansion beyond government into tech and otherindustries is positively affecting investing in the city.

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"Sacramento has always been a hub for the politics, publicsector jobs and advocacy work," Carroll tells GlobeSt.com. "But, inrecent years, the climbing cost of living amid the influx of techwealth has forced an exodus of longtime Bay Area residents into theSacramento area. Sacramento's expansion into industries beyondgovernment is having a very positive impact on investment in thecity. Typically, when a market diversifies into additional businesscategories, it is effectively diluting risk and strengthening itseconomy, which is highly attractive to investors."

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And as of late, the Sacramento market has experiencedsignificant economic growth. The city's unemployment rate hit arecord low of 3% in September 2019 with construction, manufacturingand healthcare leading the way in job growth.

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"The city is seeing a tech boom to rival Silicon Valley in termsof highly skilled tech workers," Carroll tells GlobeSt.com. "Inaddition, consumer sentiment is high and office vacancy rates areat all-time lows. All of these factors played into KBS' assistancein Prime US REIT's acquisition of Park Tower. As one of the largestinvestors of commercial property in the nation, we only invest inexceptionally well-located assets in thriving business districtswhere powerful value creation is possible. We seek out propertiesin markets with strong job and population growth, solidtransportation infrastructure, excellent walkability and respecteduniversities. This asset, and the Sacramento market as a whole,match well with our investment strategy."

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A LEED Gold-certified property, Park Tower's office tower wasoriginally built in 1992 and renovated in 2019, while the parkingarea was constructed in 1961 and renovated in 1998. The buildingfeatures a suite of onsite tenant amenities including a recentlyrenovated fitness center, locker rooms, conference center andtenant lounge.

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The property includes a three-story atrium lobby, highlyefficient building systems, 15,000 to 28,000 square feet offlexible floor plates and parking in two garages at a ratio of2.4/1,000 as compared to competing office towers at a ratio of2/1,000.

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"There are plans to upgrade the lobby, refresh the corridors andupdate the conference room to make them best-in-class for tenants,"Carroll tells GlobeSt.com. "We are also creating a brand-new tenantlounge, giving the building a more modern live/work/playatmosphere. To fill the last 8% of vacancy, we will implement oursuccessful spec suite program, building out tenant suites without acommitted tenant. These suites are extremely high quality andunique. Many office owners are incorporating spec space into theirassets, however, not many are incorporating it at this highlevel."

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The value of Prime speaks to KBS' quality of ownership andhands-on asset management, Carroll says.

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"Client asset portfolios are managed with an owner/operatormentality. Our core strength is acquiring and managing assets likePark Tower that are rare finds in the competitive officeacquisition environment," Carroll tells GlobeSt.com. "Each of thesepoints makes this transaction highly significant for Prime, KBS andfor office tenants seeking well-amenitized premier class-A space indowntown Sacramento."

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Indeed, Sacramento's healthy fundamentals bode well forcontinued growth. According to a fourth quarter 2019 Sacramentomarket report from Newmark Knight Frank, the Sacramento officemarket maintained its positive momentum in the fourth quarter tofinish the year strong. Net absorption was positive for the 13thconsecutive quarter totaling 159,317 square feet, which brought theyear-to-date total to a positive 780,922 square feet.

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Sacramento's office market also features high barriers to entrywith less than 5% vacancy in class-A office assets and no newprojects under construction in the downtown market. Currently indevelopment is a mixed-use project called The Railyards which willdouble the size of downtown Sacramento when completed. It is thelargest in-fill development project west of the Mississippi Riverand will include up to 515,00 square feet of retail, 10,000 housingunits, a 21,000 seat soccer stadium and a 1.22 million-square-foot18-acre Kaiser Medical Center.

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Several major tech, biotech and healthcare firms have a presencein the region including the Intel Corporation, Hewlett Packard,Apple, Sutter Health, Affymetrix, Lipomics Technologies Inc.,Calgene LLC, Novozymes Biotech Inc. and Volcano Therapeutics.

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"Private companies are increasingly drawn to Sacramento for itsabundant young and highly educated workforce and lower cost ofliving," Richerson adds. "More than 34% of individuals in the areahave a college degree."

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Lisa Brown

Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.