By Jon Peterson
San Francisco-based Ellis Partners has acquired the 277,030 square foot 180 Grand office building in downtown Oakland. The purchase price was in the range of $210 to $220 per square foot, which would put the purchase between $58.2 million to $60.9 million, according to sources familiar with the transaction.[contextly_sidebar id=”eJlYvN0VrXIbv5P9VXzQIxMrBZ4wMIuc”]Ellis Partners declined to comment on the financial terms of the transaction, due to a non-disclosure agreement with the seller.
The transaction will result in a good profit for the seller, Los Angeles-based CBRE Global Investors. This real estate investment firm had owned the property since October of 2004, when it paid $46.7 million or $170 per square foot, according to sources familiar with the property. A representative of the seller declined to comment when contacted for this story.
The cap rate on the deal completed was around 6 percent, according to sources aware of the transaction. This return is based on the property’s existing net operating income.
Ellis sees this property as a higher quality investment. “I look at this as a core plus deal due to the fact that the property is currently substantially leased but that some leases in the property are below market. This is due to the fact that some of the leases were signed prior to the rent increases that the market has been seeing over the past year,” says Jim Ellis, a managing principal with Ellis Partners.
The leasing efforts on the property will be handled by CBRE. The exact people on this assignment haven’t been determined at this time. The new owner is planning to make some cosmetic improvements to the property in the near future.
The Class-A downtown Oakland office market continues to tighten up. According to data from the Oakland office of Colliers International, the vacancy rate in the sub-market improved from 9.8 percent to 9.5 percent from the second to the third quarter. The sub-market totals 30 buildings covering 10.2 million square feet.
Ellis Partners acquired 180 Grand as part of its joint venture with Chevy Chase, Md.-based Artemis Real Estate Partners. The capital source for this investment was the New York State Common Retirement Fund. The pension fund has placed the relationship with Ellis Partners in its emerging manager real estate program.
This capital source has been actively buying many assets in the San Francisco Bay Area. These include the $34.9 million purchase of 4040 Civic Center Drive in San Rafael and other assets in San Bruno and Emeryville.