What Will a New Owner Do with Senator Hotel? Here are the Options

A prominent building across L Street from the state Capitol is going on the auction block next month. But it’s anyone’s guess what a new owner will do with the former Senator Hotel building.

The location can’t be beat, said two commercial real estate experts especially familiar with downtown properties. It also has considerable historic value: Built in 1924, it is on both the national and city registers of historic places. Since 1983 it has been an office building.

But David Herrera, a broker at Colliers International Sacramento, said the 198,195-square-foot building would need some tenant improvements to attract the best possible tenants.

“It would take someone with a clear understanding of the building, knowledge of the Sacramento market and the wherewithal to go in and improve it and make it compete for users,” Herrera said.

On the other hand, a new owner might not have to do much to the office spaces if the price was right. Ken Turton, of Turton Commercial Real Estate, said many associations and groups with business at the capital aren’t that well heeled and might welcome the opportunity to set up shop for the right per-square-foot price.

The building has existing issues with ceiling heights and mechanical systems a new owner may need to address, Turton said. But “it’s 100-percent leasable at some given rate,” he said.

Other uses for the building are conceivable but far-fetched, both Turton and Herrera said. Converting it back to its original hotel use, or into a condominium tower, would require adding bathrooms, kitchens or both in much of the building, Herrera said. Even then, at least two other new downtown hotels are on the horizon, so the market for another one is questionable, he said.

Turton said state requirements on residential construction, when applied to an older building, would make converting the Senator cost-prohibitive.

But for a buyer who wants to appeal to different kinds of office tenants, there is potential to create interesting spaces, Turton said. That could also set the Senator apart from other downtown office buildings around the capitol with a more conservative approach.

“There’s a respectable amount of competition,” Turton said, not only along L and K streets but increasingly on the emerging R Street corridor, which also has several state offices.

Herrera said an even more remote possibility would be doing something else on the site of the building. Its historic nature makes it unlikely a buyer could raze it completely, and leaving the shell but building a new interior would come at high cost, he said.

“I think there will be a lot of interest in buying it,” he said. “Especially when you take into account the location and history.”