By Jon Peterson
Baltimore, Md.-based Alex. Brown Realty and Irvine-based CIP Real Estate have paid $25.75 million or $132 per square foot to buy the 195,044 square foot Eden Landing Business Park in Hayward. This asset is considered to be flex industrial space.
The seller of the property is San Francisco-based Berkeley Partners. They were represented in the transaction by CBRE. Involved in the sale were Rebecca Perlmutter, first vice president, Darla Longo, vice chairman, and Bob Ferraro, senior vice president. “The seller had acquired the property a few years ago. It had completed its business plan on the property, and it wanted to take advantage of the strong investor demand there is for flex space in Hayward,” said Perlmutter.
The property was acquired in a joint venture with Alex. Brown and CIP. Around 90 percent of the equity or $9.7 million was invested into the deal by Alex. Brown. This capital will give the real estate manager a 90 percent stake in the property with the other 10 percent held by CIP Real Estate. Financing on the venture was supplied by Wells Fargo.
The price on a square foot basis comes in much lower than replacement cost. According to information provided by industry sources, replacement cost for flex industrial space in Hayward would be approaching $280 per square foot.
Eden Landing will be a value-add investment opportunity for the new property owners. The current rents in the property are below market rents with staggered rollovers over the next three years. 36 percent of the leases will roll in the first year of new ownership, 29 percent in year two and 23 percent in year three.
There are a total of 101 tenants in the property. Professional, scientific and technology services, 3PL and real estate consultancy are the most common industries represented. These firms make up 46 percent of the tenant roll. Another 21 percent of the asset are leased to construction, warehousing and wholesale trade types of tenants.
The acquisition will be the first property that CIP has acquired in the San Francisco Bay Area. “We have been looking to find an asset to buy in the Bay Area for 10 years. This property fit our criteria from two standpoints, [one] being a value-add investment opportunity, and that it was of a large enough scale to catch our interest,” says Bob Strom, chairman and co-founder of CIP.
This transaction will be the 19th asset that CIP has acquired with Alex. Brown Realty. This relationship was started in 1998, and it has functioned as a deal-by-deal arrangement. CIP has 80 percent of its current real estate portfolio invested in industrial assets. Its other major property type is office buildings. All of its portfolio is in value-add deals and involves the purchase of A and B quality assets.
Alex. Brown made its investment into Eden Landing for its commingled fund, ABR Chesapeake Fund V. This is a value-add commingled fund. It owns one other asset in the San Francisco Bay Area. This is an office/R&D property in Sunnyvale. “From a diversification standpoint, we would be interested in buying one or two more additional assets in the Bay Area for our fund. Our other targeted markets include other parts of California, Texas, the Carolinas and the Mid-Atlantic states,” says Thomas Burton, chief investment officer for Alex. Brown.