The Swig Co. Buys Kaiser Center for $190M

OAKLAND, CA-The Swig Co. has acquired the 900,000-sf Kaiser Center for about $190 million in a joint venture with GMAC Institutional Advisors. The seller was a joint venture of El Segundo-based Summit Commercial Properties and its parent Highridge Partners, which bought the building in 2003 from a reorganizing Kaiser Aluminum and Newkirk-Kalan LP for $100 million. Located at 300 Lakeside Dr., Kaiser Center is a mixed-use complex overlooking Lake Merritt that consists of three structures: the 28-story, 784,689-sf Kaiser Center I office building; Kaiser Center II, a mixed-use, 128,730-sf retail/office building; and a five-story, 1,339-stall parking garage designed to service the two office assets. GMAC Commercial Mortgage, through its proprietary lending group, provided $147 million in fixed-rate financing for the acquisition. Although unwilling to confirm the purchase price, Jeanne Myerson, the Swig Co.’s chief executive officer says, “This investment represents sane pricing with a decent return, is based on rents at or below market, and offers some redevelopment potential, along with a new development option on a portion of the site.” Myerson adds that the Kaiser Center I building is better than 98% leased, with 67% of the tenants investment grade and fewer than half of the leases set to expire before 2011. Kaiser Center tenants include the Bay Area Rapid Transit Authority (BART), which leases well more than 300,000 sf; the University of California Regents with more than 152,774 sf; the Kaiser Foundation Health Plan, which occupies about 75,000 sf; and California Bank & Trust, with about 45,000 sf. The Swig Co. reportedly tied up the building for closer to $200 million, but the ultimate sale price was just north of $190 million, according to local industry sources.When Summit Commercial acquired the building in 2003, it was 85% leased. The company then proceeded to invest an estimated $30 million in renovations. At that time, Summit president Jack Mahoney called the building “a masterpiece for its time” and said his company would restore the complex to regain its prominence among the premier buildings in the Bay Area. “Particular attention will be paid to the ground floor, infusing it with natural light and restoring the open and airy space,” he said. “Further, we will be developing a long-term plan that will include some reconfiguration of the retail component and analysis of the possibilities for new development.” Kaiser Center was developed to showcase Henry J. Kaiser’s engineering and design skills and headquarter Kaiser Aluminum Co. Among the new ideas he employed, there was one in particular that smacks of today’s green building principles: instead of using asbestos, he directed that crushed oyster shells be mixed with the concrete to create insulation.”You know this building is special the minute you step into the lobby,” says the Swig Co. chief investment officer Ken Perry. “We like buildings with character and designs that are unique. The views are stunning on just about every floor, the floor plans work very nicely and the Oakland market is improving with an outlook of higher rents.”The Swig Co. owns eight million sf nationally, including two properties in New York City (the Grace Building and 1065 Avenue of the Americas). In San Francisco, it owns the Mills Building (220 Montgomery), which it renovated in 2003 at a cost of $20 million; the Russ Building, which it owns in partnership with Shorenstein Co.; 369 Pine St.; 633 Folsom St. and; a development site at 350 Bush St.