"For a user, buying as is can be advantageous as they can reduce their occupancy costs by owning rather than leasing and [by] locking in a long-term, low cost loan because interest rates are very attractive right now," explains David Bourne, Equastone's chairman. "The cost of owning the building, which is mostly the cost of the mortgage, will be lower now than if they leased the property."
An affiliate of Equastone, which specializes in opportunistic, value-add and core-plus investments, originally acquired the facility in July 1996 for $4.7 million. The property generated an annual return of about 33% before becoming vacant in 2006.
"We bought the property in the worst of times in 1996 [when] property values in San Diego for this kind of real estate had hit rock bottom prices," Bourne says. "After the RTC debacle [Resolution Trust Corp., which liquidated insolvent savings and loans and sold the corresponding assets] and a mass downturn of San Diego's economy, we enjoyed good cash flows during our ownership period and the building remained 100% leased from 1996 through 2005."
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