By Jon Peterson
San Francisco-based DivcoWest Properties has spent around $275 per square foot, or in the neighborhood of $134.75 million, to acquire the 490,000 square foot office building located at 1999 Harrison Street in downtown Oakland, according to multiple sources familiar with the transaction.
The real estate brokerage community does see a value-added component to 1999 Harrison Street. “There is some room for this property to increase the occupancy. It’s now 82 percent leased in a market where the class A vacancy is 13 percent,” says John Dolby, a senior vice president with Cassidy Turley Commercial Real Estate Services in Oakland.
This transaction was the second time that Beacon had tried to sell the property. “They were unable to sell the property when they first brought it to the market about 18 months ago,” said Dolby.
Oakland is a market that still offers potential tenants a big difference in rental rate costs as compared to San Francisco. “Full-service gross rents for the Class A market in Oakland is now as high as $38 per square foot. This makes it 30 percent to 40 percent lower on the average than in San Francisco,” said Dolby.
Beacon Capital had owned 1999 Harrison Street for its commingled fund, Beacon Capital Strategic Partners IV. This is a commingled fund where the real estate manager raised a little over $2 billion of equity. The capital raised was completed in 2006. One of the lead investors with a $350 million commitment was the California State Teachers Retirement System.
Beacon Capital is known as a buyer of major office buildings around the country. The company has a regional office in San Francisco located at One Sansome Street.
According to its website, Beacon Capital is now investing capital for its Beacon Capital Strategic Partners VI commingled fund. It attracted $2.54 billion for this commingled fund, which included a $300 million commitment from CalSTRS.
The San Francisco Bay Area remains one of its targeted markets. Beacon Capital owns two buildings in the region for Fund VI. These are the 720,000 square foot Santa Clara campus property in Santa Clara and the 385,000 square foot 221 Main Street in San Francisco.