Drawbridge Achieves 8.5 Percent Yield on Sonoma County Purchase

3850 Brickway The Registry real estate

By Jon Peterson

A single-tenant office complex in Santa Rosa occupied by global medical technology company Medtronic Inc. is producing an 8.5 percent return for San Francisco-based Drawbridge Realty Trust.

“This cap rate is based on the current net operating income being produced by the property,” said Adam Lasoff, a director with Cushman & Wakefield in its San Francisco office, one of several people who represented the seller, Reno-based Basin Street Properties. The buildings’ in-place net operating income is $1.6 million.

Medtronic’s lease for 3850 Brickway Blvd. and 3880 Brickway Blvd. involves 126,585 square feet and extends another four-and-a-half years. The Minneapolis-based company, which competes with St. Jude Medical Inc., Boston Scientific Corp. and Abbott Laboratories, among others, reported sales of $16.6 billion in fiscal 2013, up on a compound annual basis of 4 percent a year since 2009. Besides its Santa Rosa offices in the Bay Area, Medtronic has a Palo Alto location as well as multiple Southern California sites. With operations in 140 countries worldwide, it has a corporate initiative to accelerate its global growth.

“The purchase of the property for us was more driven by the tenant than the market it was located in,” said Mark Pearson, Drawbridge vice chairman. “Medtronic Vascular, which occupies 100 percent of the property, is a strong tenant. Their commitment to this property is reflected in that they recently invested more than $4 million to install new improvements. This is a good sign.”

Medtronic Vascular employs 200 people at the location, which is in proximity to other biomedical company locations including Boston Scientific and Direct Flow Medical, according to Cushman & Wakefield.

Basin Street did not respond to phone calls seeking comment. The company has a regional office in Petaluma.

Drawbridge is in a major growth mode with a portfolio of two million square feet and a goal to acquire six million to eight million total. “If we could get to the right size over the next couple of years, we would consider taking our company public,” Pearson said.

The Santa Rosa buy was the company’s first acquisition using a $150 million revolving-credit facility. KeyBank National Association is the lead bank. Other lending institutions involved include Wells Fargo Bank, US Bank and Bank of Montreal.

“The credit facility gives us more flexibility. One of the key issues in buying today is assurance of being able to close properties in a timely manner. This facility allows us to do that,” Pearson said.

Drawbridge wants to buy office buildings that are leased to major corporations on a single-tenant basis. Besides the San Francisco Bay Area, it considers opportunities in Southern California, Austin and Salt Lake City. It targets yields from 7 percent to 8 percent.

Others in the capital markets group for Cushman & Wakefield involved in the sale were George Eckard and Grant Lammersen.

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