Sutter Square Flourishes After Two-Year Spruce Up
Meridian acquired the property in August 2017 when the building was 78% occupied, and invested more than $4 million in interior renovations during the past two years to bring occupancy up to nearly 90%.
CONCORD, CA—Sutter Square, a 174,689-square-foot nine-story office building located at 1800 Sutter St. near downtown, has sold to a joint venture between Barker Pacific Group and Iron Point Partners. The sale price was $30.9 million.
Meridian, a real estate developer and owner of medical office real estate, acquired the property in August 2017, when the building was 78% occupied. During its ownership, Meridian invested more than $4 million in interior renovations and brought occupancy up to nearly 90%.
“Below-market rent and occupancy provided an opportunity for Meridian to purchase this asset as part of our value-add office investment strategy,” according to Dan Rosenbaum, Meridian senior vice president. “We made significant improvements to the property and the Sutter Square project allowed us to use our creativity and client-focused real estate strategy to provide value to the developing environment of downtown Concord.”
Indeed, Meridian performed a hefty range of improvements in only two years of ownership. This work touched much of the building’s footprint.
“We were able to complete an extensive list of renovations and leasing in just over two years of ownership,” said Linda Shoemaker, Meridian’s vice president of asset management. “Renovations included chiller replacement and installation of automated building controls, a new roof, a new conference room with upgraded audio-visual equipment with patio access and a view of Mt. Diablo, new common area corridor paint, new elevator lobby finishes and a remodeled gym with upgraded fitness equipment. A pendant lighting feature is showcased in the grand two-story lobby. Between new leasing and renewals, we transacted on over 75% of the building.”
Scott Ellis and Eric Erickson of Colliers International managed the leasing efforts at the property. Both the buyer and seller were represented by Bob Gilley, Brad Idleman and Andy Zighelboim, also of Colliers International.
“The sale of Sutter Square completes a portfolio repositioning that we embarked on in 2019. Over the past year, we are have sold over $100 million of existing assets and we have added several significant assets to the portfolio including properties in San Mateo and Santa Ana, CA,” John Pollock, Meridian’s CEO, tells GlobeSt.com. “Economic conditions look stable and I expect continued job growth in 2020, low unemployment, modest inflation and stable interest rates. Meridian will continue to seek out opportunities to deploy capital on quality assets where we can add value. We hope to have a couple of more acquisitions before the end of our fiscal year, which is on March 31.”
As Pollock mentions, Meridian purchased two value-add office buildings in California, a six-story 72% leased 100,000-square-foot office building located near downtown San Mateo, and a 100% vacant, 53,500-square-foot office building in Orange County in October 2019.
“The sale of this asset (in Concord) marks our continued efforts to add value to general office buildings in the Bay Area,” continues Rosenbaum. “With approximately 500,000 square feet currently in development/redevelopment, plus another 500,000 square feet in the development pipeline, we are still looking for more acquisition opportunities throughout California, the Pacific Northwest and the Southwest.”
While the vacancy rate has flattened in the North 680 Corridor, rental rates continue to increase. However, rates are still a bargain compared to the rents in the San Francisco, South Bay and Oakland submarkets, according to a report by Colliers International.