The Sterling-Hines JV acquired Parkside Towers in mid-2005 as part of an unstable five-building, 1.7-million-sf portfolio from Equity Office Properties for which it paid approximately $397 million, of which $83 million was allocated to Parkside Towers. The other properties were 405 Howard St., 301 Howard and 120 Montgomery, all in San Francisco, and San Rafael Corporate Center. The JV has been re-trading the properties following a two-year effort to add value to the assets.
Most recently, in August, it sold the 157,723-sf San Rafael Corporate Center for $90.2 million or $572 per sf to a JV of Seagate Properties and JP Morgan Investment Management. In July, it sold 405 Howard St. to a joint venture of Ashforth Pacific Properties and GE Asset Management for $247 million or $490 per sf. It sold 301 Howard, a 502,000-sf building, to Archon in March for $129 million or $257 per sf.
With several floors that had been in shell condition since the building was completed in 2002, Parkside Towers was the least stable asset in the portfolio. The two-building development in the 1000 block of East Hillside Boulevard was just 16% leased two years ago. Thanks to a busy 2006, the property is now 76% leased. New tenants include IBM, which leased 60,000 sf in July, and Acxiom, which leased 52,000 sf in May.
Parkside Towers was master leased prior to its 2002 completion by Inktomi, a data retrieval company. Inktomi never even began space planning before agreeing to pay $54 million to terminate the $315-million lease obligation. Shortly thereafter, it agreed to be acquired by Yahoo Inc. for $235 million.
The current leasing broker for Parkside Towers, Craig Kalinowski of Cornish & Carey, could not be reached for comment. As of mid-year 2006, just prior to the IBM lease being signed, the asking triple net lease rate for space in Parkside Towers was $2.95 per sf. The rate assumed at lease a five-year lease and a $50-per-sf tenant improvement allowance.
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