(To read more on the industrial market, click here.)
SAN DIEGO-After a fairly short hold time, San Diego-based the Shidler Group has sold off an 18-building office and R&D portfolio for $209 million. Palo Alto-based Broadreach Capital Partners acquired the more than one million sf from a partnership of Shidler and Angelo, Gordon & Co.
Matt Root, a partner with Shidler, says the timing was right to sell the properties "into a very strong investment market." Root adds that the sale is part of an effort "to prune our portfolio of select assets as part of our capital recycling program."
Shidler acquired the portfolio in late 2004 for $138.5 million from Los Angles-based REIT Arden Realty Inc., which has since been acquired by GE Real Estate for $4.8 billion. At the time of Shidler's buy of the portfolio, Root told GlobeSt.com that "Arden was making a decision to basically dispose of its non-core assets."
Since the acquisition, Shidler has invested more than $6 million in capital improvements to the properties and brought the portfolio to an 82% occupancy rate, which includes more than 165 tenants in the technology, financial services, government and medicalservices industries. Major tenants include Catellus Development, the City of Los Angeles, Stewart Title, Salomon Smith Barney and Verizon.
The portfolio counts nine projects containing 18 buildings. Ten of the properties are in the Los Angeles area, with the remaining properties in San Diego. Major properties include the 111,072-sf Glendale Corporate Center in Glendale and the 183,402-sf Morehouse Tech Center I, II & III, a three-building site in the San Diego area.
Northern California's Broadreach maintains a bullish attitude on Southern California property it sees as a good value. The firm saw that in this portfolio, which had pricing under $200 per sf. According to company officials, Broadreach also liked the portfolio's existing rent rolls and price-to-replacement cost.
"This acquisition followed by recent deals in Pasadena, Hollywood, West Los Angeles and El Segundo will compliment our exisiting office portfolio," according to Broadreach's managing director David Simon. "It's rare today to be able to acquire a quality value-add office portfolio at a significant discount to replacement, especially in Southern California."
Broadreach acquired the portfolio through its second discretionary real estate investment fund, the $700 million BRCP Realty II LP. BRCP-II invests in the acquisition, re-development and development of commercial property and land in the western US.
Adam Edwards and Daniel Broderick in the San Diego office of Eastdil Secured and Stephen Silk and Sean Sullivan in the firm's Los Angeles office represented Shidler. Broadreach Capital Partners represented themselves in-house.
The move to sell should come as no surprise to those following Shidler's investment strategy of late. At the RealShare San Diego event in May, Root was on the panel "Who's Buying Up San Diego?" During the discussion he stated that the firm is looking outside of Southern California, to other markets like Honolulu and Arizona, where inefficiencies still exist.
However, the firm will still look to find properties in the Southland. Last week, the firm released a statement that it plans to acquire $1.5 billion in office properties over the next 18 months. According to founder Jay Shidler, the company and its newly formed private REIT, Pacific Office Properties Trust, have targeted the Los Angeles and San Diego markets, along with Honolulu and Phoenix, for the acquisitions.
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