American Financial Realty originally acquired the three-building, 9.5-acre complex along Interstate 680 in June 2003 as part of a 158 property portfolio sale-leaseback transaction with Bank of America. Under the terms of that purchase agreement, Bank of America elected to vacate the Ellinwood Office Complex in 2005. The complex was developed in the mid 1980s as part of the Ellinwood mixed-use community.
AFRT invested about $16.2 million in the complex, or about $5.4 million for each of the three buildings, which equates to about $123 per sf. None of the parties involved have revealed the sale price, but local sources tell GlobeSt.com it had to be at a steep discount to replacement cost, which is estimated at around $275 per sf, because DJM will have to spend several million to rehab the 30-year-old buildings and to make a decent ROI would need to have its all in cost below $200 per sf.
One of the brokers in the deal, Ed Del Beccaro of Colliers International, tells GlobeSt.com that DJM will be looking to lease the buildings out at $27 per sf, full service. Colliers also has the leasing assignment.
The property was originally marketed as a residential redevelopment site. Then the market turned, residential got worse and office better, and it was sold to an office investor.
DJM essentially will be bringing new product to the market. Since the building was owner occupied, it was never counted as part of the office inventory and, therefore, never included in the vacancy calculations. As a result, Del Beccaro says its addition will temporarily increase vacancy in the submarket for at least the next 18 months while the rehab is completed and the project is leased up.
Del Beccaro doesn't see the complex remaining unoccupied for much longer than that. "We're predicting single-digit vacancy for [Central Contra Costa County] by the third quarter of 2007," he says.
For AFRT, which invests in buildings occupied by financial institutions, the sale gets rid of one of its top 10 vacancies. "It is a key sale for the company this quarter," says Glenn Blumenthal, AFRT's chief operating officer.
The building addresses are 300, 400 and 500 Ellinwood Way. Beccaro was assisted in the transaction by fellow Colliers brokers Kevin Van Voorhis, Andy Zighelboim and Scott Kinsey. Becarro, Scott Ellis and Trigger Reital will have the leasing assignment going forward.
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