San Diego ⎯ In what may be the largest office building transaction in the history of downtown San Diego, three more prominent high-rises have been sold.
Entities controlled by Santa Ana-based Triple Net Properties LLC paid a total of $274.5 million for Emerald Plaza, the Comerica Bank building at 600 B St. and Golden Eagle Plaza at 525 B St. Together the buildings total about 1.16 million square feet. The price works out to about $250 per square foot ⎯ a figure that might have been higher except part of the Comerica Bank building is on a ground lease. The exact value of each building was not clear since the transaction was done as a package.
The acquisitions were completed in two parts. The buildings at 600 B St. and 525 B St. were acquired in one transaction, and Emerald Plaza was bought in another. Triple Net’s purchasing entity is known as NNN Emerald Plaza LLC. Southwest Value Partners, the seller, sold the properties through its 400 West Broadway partnership.
The Comerica Bank Building has 336,049 square feet in 24 stories, Emerald Plaza has 356,901 square feet in 30 stories and Golden Eagle Plaza has 427,988 square feet in 22 stories.
Collectively, the properties were 91 percent leased at the time of sale, with major tenants including Liberty Mutual Insurance, Comerica Bank, San Diego Chamber of Commerce, California Bank and Trust, U.S. Navy, city of San Diego and Harcourt. Comerica is 99 percent leased, Golden Eagle is 93 percent occupied and Emerald Plaza is reportedly about 90 percent full.
The three buildings are the latest in a slew of more than 14 sales within the past 18 months in which most of the major high-rises in downtown San Diego have changed hands. One America Plaza, Symphony Towers and the old Wells Fargo building are just a few that have been sold recently. This sale would only seem to solidify the notion that San Diego is generally considered to be one of the most desirable investment markets nationwide for investment capital.
“Downtown San Diego is viewed as one of the top office markets in the country, and it commands very strong prices,” said Mark Schlossberg, Southwest Value Partners principal and managing director.
Up until now, San Diego-based Southwest Value had controlled the most office real estate downtown. With the sale, Triple Net becomes the largest landlord in the market, controlling approximately 12.5 percent of the office space in the San Diego Central business district.
Schlossberg said his firm acquired Emerald Plaza, including what was then a Pan Pacific Hotel, in February 1995. While he didn’t reveal the acquisition price, it was believed to be close to the $74 million price Southwest Value received for its sale of the hotel alone in December 1997.
“We bought these assets at the right time,” Schlossberg said.
Kevin Shannon, Scott Schumacher and Michael Moore of Grubb & Ellis’ South Bay (Los Angeles) office represented the buyer and the seller in the transaction.
“This is Triple Net’s largest acquisition to date,” said Shannon. “They should place more than $1 billion into office properties this year, which is major for a tenant-in-common buyer group. This transaction follows a $46 million office sale we brokered in Torrance, California, last month involving the same buyer and seller.” Both the Torrance and San Diego portfolio sales were sold “off market” to Triple Net Properties.
Steve Corea, vice president of acquisitions for Triple Net Properties, said the acquisition might not have happened were it not for Triple Net’s Torrance sale. While negotiating the Torrance deal, Southwest Value told Triple Net it had properties it could sell in downtown San Diego, but that they would have to be purchased as a package. By April, the parties had reportedly reached an understanding.
“We closed on Monday, on schedule,” Corea said.
He said Southwest Value took a great risk when it bought the three buildings nearly a decade ago. If this sale is any indication, that gamble has paid handsome dividends.
“They bought when downtown was unloved and unwanted, and look at it now,” said Corea.
From its headquarters in Santa Ana, Triple Net manages a growing portfolio of more than 19 million square feet of commercial properties with a market value of more than $2.5 billion.