By Jon Peterson
In late December, news had broken that Hartford, Conn.-based Cornerstone Real Estate Advisers’ Alternative Investments Group has originated a $144.3 million loan to finance the acquisition and repositioning of Centennial Towers, a 12-story, 340,000 square foot, Class A office building in South San Francisco, on behalf of an institutional client.
The total price of the transaction was not disclosed, but The Registry has learned through public records that Centennial Towers sold for $162 million and that two adjacent lots north of the structure also sold for an additional $58 million, for a total of $220 million.[contextly_sidebar id=”TK6QKLXm1quKYZiGzQvi0LwckzdCVvwX”]The Registry also learned that Los Angeles County Employees Retirement Association (LACERA) is the funding source for the $144.3 million loan provided by Cornerstone.
When contacted, John McClelland, the principal investment officer for real estate for LACERA, referred all questions on Centennial Towers to Cornerstone. This real estate manager declined to comment in an e-mail that LACERA was the capital source on this transaction as well as confirm the total transaction cost.
Cornerstone did provide comment regarding their investment strategy in life science properties. “We believe that there are a handful of life science markets across the country that are deep and vibrant enough to provide opportunities for investment. These specific markets, which include Boston, San Francisco and San Diego among others, each have long histories involving life science research and development. We feel that we can make sound investments in these markets that reflect strong risk adjusted returns for our clients,” says J.B. Gerber, a vice president of the Alternative Investments Group at Cornerstone.
The new owner of Centennial Towers is Phase 3 Real Estate Partners. The loan from Cornerstone is being used by the property owner for the acquisition and repositioning of the project. The existing building, which is leased to Success Factors today, totals 12 stories and is 340,000 square feet. “There’s an intrinsic quality that is right in-line with our life science vision,” said Neil Fox, CEO of Phase 3 Real Estate Partners. “The design and construction is spectacular. We’re going to do something the market has never seen before; this project will set the new bar for laboratory research space.”
The San Francisco Bay Area is no stranger to such ambition, and this is one of the reasons Cornerstone continues to strongly believe in this market. “This region is thriving across asset classes, and market fundamentals are extremely compelling. Everyone seems to be looking for the ‘chink in the armor’ or black swan event that will impact the San Francisco Bay Area similarly to 2000, but from a supply and demand perspective the market remains very attractive,” said Gerber.
Cornerstone is known as a national real estate investor on both the debt and equity side of real estate. It investors for a mixture of pension funds and other institutional investors.
Image courtesy of Hathaway Dinwiddie