SAN DIEGO—A joint venture between Carleton Management Inc. and the Downtown LLC (Bishop Family) has sold the Art Center Block for $34 million to Paragon Real Estate Fund LLC. The property consists of five office buildings totaling 132,854 square feet in Downtown San Diego's East Village, a burgeoning neighborhood.
CBRE's Kevin Mulhern and Rachel Parsons represented the seller, while the firm's Scott Peterson and Bill Chiles of the Capital Markets' Debt & Structured Finance team arranged a short-term, floating loan on behalf of Paragon Acquisitions LLC for $23.6 million through Guggenheim.
Mulhern says, “Owning an entire city block in Downtown San Diego's largest and fastest-growing neighborhood is a rare opportunity with tons of potential. Directly east of the property is the planned East Village Green Park, a 4.1-acre park owned by the City and planned for future development. The property is also zoned for multifamily development, which could lend itself to potential redevelopment in the future.”
Mulhern told GlobeSt.com in November 2016 that top-of-the-market rents in class-A multifamily buildings with all the amenities are great, but the market really needs good, solid workforce housing for affordable rents in most markets. Mulhern and Parsons at that time had represented San Diego-based seller Silvergate Development in the sale of the Quarry Apartment Homes at 4330 Palm Ave. in La Mesa, CA, for $17 million to an affiliate of John Jaffe Company LP.
Art Center Block is a full city block bounded by Park (12th), 13th, F and G sts. The five office buildings range from one to four stories and were built between 1924 and 1971. The NewSchool of Architecture and Design occupies 51% of the total office-building square footage. The property also includes the former HangTen clothing-manufacturing facility. The other office space is 97% occupied by several creative-office tenants.
“East Village is one of the most vibrant and dynamic communities in San Diego,” says Ricardo Jinich, co-founder of Paragon. “Art Block provides much-needed creative-office space and has great potential as a future development site. This acquisition more than doubles our footprint in Downtown San Diego and reaffirms our long-term commitment to the area.”
Art Center Block is centrally located one block from the Park and Market trolley stop, providing easy transportation access throughout Downtown and other submarkets. Additionally, the property is within minutes of many of Downtown's famous attractions, including Petco Park, Balboa Park, San Diego Zoo, San Diego Bay, Embarcadero Park, San Diego Central Library, Convention Center, San Diego City College and the San Diego International Airport.
According to CBRE Research, San Diego office market fundamentals were trending positively this quarter. Office vacancy in downtown is down 350 basis points year over year, and asking lease rates are up 5.9% year over year.
Also, in Makers Quarter, a new, speculative, multi-tenant building, broke ground in the East Village in May. As GlobeSt.com reported previously, the Block D project, a six-block work/live/play district will be an interactive prototype for the workplace of the future. The BNIM-designed collaborative-office hub with retail and restaurant on the ground floor is inspired by the neighborhood's maker spirit, BNIM principal and architect Matthew Porecca told GlobeSt.com.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
