By Jon Peterson
New York City-based Deutsche Bank has put the 322,615 square foot Mt. Diablo Plaza office asset in Walnut Creek on the market for sale, according to sources that are aware of this asset. The property is located at 2175-2185 North California Boulevard.
Deutsche Bank declined to comment when contacted for this story. The real estate investment firm has owned the property since April 2005. It acquired the property at that time for $91 million or $282 per square foot, as stated by sources that track the buying and selling of office buildings in Walnut Creek. The cap rate on this purchase was 5.99 percent based on the net operating income of the property.
There has been no indication as to what the sales price will be this time around. Deutsche Bank has hired the San Francisco office of Newmark Grubb Knight Frank as the listing agent on the sale. A person representing the company is Steven Golubchik, vice chairman. He declined to comment when contacted for this story.
Mt. Diablo Plaza is considered to be a core plus type of asset. The property is now 89 percent leased to a strong mixture of tenants. The largest tenant in the complex is UBS which occupies 22,043 square feet. It has a lease that runs until May of 2018. First Republic Bank has a lease covering 19,028 square, which will expire in October of 2022. Other tenants in the building are KPMG with 13, 000 square feet, Sutter Health with 11,000, CBRE with just over 10,000, along with Wells Fargo, Sun Life Financial, AXA Equitable, NTT Data and Bacardi Rum.
The new owner of the complex will have the chance to add value to the asset going forward by leasing up the empty space and bringing the current rents up to a market level. In-place rents in the property are currently $2.65 per square foot per month, which is around 31 percent below today’s current market of $3.84 per square foot per month. Around 72 percent of the total rentable square footage is set to expire within the next three years.
Mt. Diablo Plaza was first developed in 1984. Its consists of two buildings one that is 10 stories and the other is two. The asset covers 3.28 acres of land. It has a parking operation with 825 parking stalls. The property is located one block from the master-planned, 16-acre Walnut Creek BART Transit Village and is in proximity to 21 existing or proposed multi-family developments, which will add roughly 97,000 square feet of additional ground floor retail when fully completed, stated the offering document.
The overall office market in Walnut Creek is showing a strong performance. The Class A vacancy rate is now at 9.7 percent, which represents the lowest level in more than 10 years. Rental rates for this segment of the market has increased by 23 percent since 2013. Proximity to public transportation, BART in most cases, has resulted in greater interest from potential renters, and Newmark’s document states that approximately 80 percent of new tenants in the North I-680 corridor have moved to a BART-adjacent building.