State-Leased Building in Natomas is Third Graceada Purchase

Originally Posted to Sacramento Business Journal

Unlike Graceada Partners' first two Sacramento purchases, its third this year won't involve a lot of further investment.

Escrow closed this week for Modesto-based Graceada on 2101 Arena Blvd., a two-story, 79,920-square-foot office building in Sacramento's North Natomas area. Based on a $155-per-square-foot purchase price, the sale price was about $12.4 million.

"What we like about the building is it's a large bet on the state of California and its tenancy," said Graceada Principal and co-CEO Joe Muratore. The fully occupied building is the headquarters of the California Department of Business Oversight. "It's a good opportunity to buy a building at half the replacement cost."

Previous owner Realty Advisors Inc., based in Sacramento, recently completed a thorough building renovation, Muratore said. Because the state had also contributed heavily on tenant improvements, it's paying below-market rent and will likely remain in place for some time, he added.

Realty Advisors, which also sold another property to Graceada Partners this month, did not return a message Friday.

Investment fund Graceada's strategy is to hold onto 2101 Arena for the term of the lease, or about another nine to 10 years, and plan to benefit from rising rents on the other end, Muratore said.

In a sales announcement, Graceada noted the building's location near the Centene Corp. (NYSE: CNC) campus to the west, opening next year, as well as its proximity to housing and amenities.

Starting in March, Graceada Partners began investing in Sacramento with first a Point West office building, and within the last month, an apartment property in the Pocket neighborhood. Muratore said the firm is in escrow on another sizable office building, and by year's end will likely buy another local apartment property. "We are very actively growing," he said.

The firm is finishing up its Graceada Partners Fund II and will begin a Fund III in the new year, with an ongoing goal of a 15% return or better for investors, he added.