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SACRAMENTO, CA-The state has inked a 20-year lease for a 285,000-sf, three-building low-rise campus here on behalf of the California Highway Patrol. Known as Continental Plaza, the buildings will be used to consolidate CHP’s administrative functions, which are now spread among several buildings in the Sacramento area. The law enforcement agency is slated to fill its new headquarters with 1,000 employees next September.

The state’s lease rate starts at $2.44 per sf per month, fully serviced with the exception of utilities, an information office with the state Department of General Services tells GlobeSt.com. The lease agreement includes a $41-million ($144 per-sf) tenant improvement allowance, annual rental rate bumps (approximately 1.5%) and a purchase option that may be exercised at the end of either year 10 or year 20. If exercised at year 10, the purchase price would be based on a 7% cap rate on the property’s NOI for year 11, according to DGS. If exercised at the end of the lease term, the purchase price would be based on a 7% cap rate on the NOI rent from year 19. If the state pays rent for 20 years, it would pay the property owner $193 million, according to DGS.

The property owner is Grove Investment Co. of Newport Beach, CA. Grubb & Ellis brokers Bill Newland, Clyde Rawlings and Toss Vallentine represented the building owner in the transaction. Cornish & Carey represented the state.

Newland tells GlobeSt.com that as part of the build-out the facility will be secured by a wrought iron fence with brick columns. Amenities will include water features, covered walkways, outdoor seating and a helipad. The campus has been empty since the state Department of Health Services vacated the buildings in 2003.

The largest of the three buildings is a 160,000-sf single-story brick building that in the 1940s was utilized to manufacture cans. It was retrofitted for office use in 1988. The two other buildings are each two-story tilt-wall structures built in 1990 and 1998 specifically for DHS. The building addresses are 591, 601 and 611 N. 7th St.

“The fact that Continental Plaza was an existing facility offered many benefits, including cost savings to the agency, an accelerated occupancy schedule and the reuse of an existing structure, [which is] part of the state’s ‘green’ strategy,” Newland says. Per state requirements, all three buildings will be renovated with the goal of receiving a LEED-NC-Silver certification from the US Green Building Council.

The campus is located at the corner of North 7th Street and Richards Boulevard, which sits within the River District, a major mixed-use redevelopment area adjacent to Downtown Sacramento. Also at the intersection is Township 9, a recently approved 65-acre development that is slated for 2,500 residential units and 150,000 sf of neighborhood retail and restaurants. The project includes space for a transit station and tracks for future light rail, which is expected to be up and running in 2010.

There are actually four buildings that comprise Continental Plaza. The fourth building is an older 100,000-sf warehouse that Grove has received entitlements to replace with an office building as large as 12 stories and 810,000 sf. The building would sit at the corner of Richard Boulevard and North 7th Street, just in front of the existing buildings. A timeline for the project was not immediately available.

Newland says the River District–known for its fresh produce, restaurant equipment distributors and eclectic mix of businesses–is becoming a destination for public safety and other state and local government uses. In addition to CHP headquarters, the City of Sacramento previously acquired a 150,000-sf building at 300 Richards Blvd from Grove that now houses the city’s police department.

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