Ellis Partners Pays $34.9MM to Buy Office Building in San Rafael

Real Estate Partners, New York State Common Retirement Fund, Cushman & Wakefield

4040 Civic Center Drive San Rafael real estate The Registry

By Jon Peterson

San Francisco-based Ellis Partners has acquired the 130,237 square foot 4040 Civic Center Drive office building in San Rafael for $34.9 million or $267 per square foot. The sales price was stated by the seller, Kilroy Realty Corporation, in its third quarter 2014 supplemental financial report. It represents a gross sales price before the impact of commissions and closing costs.

[contextly_sidebar id=”oyLeo2DKRCDXpissVKifc9CNfcSBS6Wl”]The deal is set to close on Friday October 31st. Ellis Partners would not comment on the acquisition price of the property for this story.

The cap rate on this deal is projected to be in the range of the high six percent to low seven percent range, according to sources aware of the transaction. This return is based on the property’s current rental income.

“We believe that we have acquired one of the highest quality office buildings in Marin County. We also like the price point that we have come in at that is well below replacement cost,” said Jim Ellis, a managing principal with Ellis Partners.

The buyer views this property as a core plus asset. There is very strong income at the property with its 95 percent occupancy. There will be a chance to add value in the future, as well. “There could be value added to the property as there is 15,000 square feet in the property where the tenants will be coming up for renewal over the next two years. This is space currently occupied at below-market rents,” said Ellis.

The new owner will be investing some additional capital into the property going forward. This will be done to improve the mechanical systems in the property and upgrade the HVAC system.

Ellis sees that 4040 Civic Center Drive is an asset that is outperforming the overall office market in Marin County. “The vacancy for class A space in Marin County is now at around 13 percent and is moving in the right direction,” he said.

Kilroy Realty is selling the property through its listing agent, the San Francisco office of Cushman & Wakefield. One person involved in the sale is George Eckard, an executive director in its Capital Markets division. He did not respond to phone calls seeking comment for this story.

Ellis used an institutional capital source to acquire 4040 Civic Center Drive. This was its joint venture with Artemis Real Estate Partners and the New York State Common Retirement Fund for the pension fund’s emerging manager program. Ellis has closed on other deals in the San Francisco Bay Area with this relationship including assets in San Bruno and Emeryville.

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