By Jon Peterson
San Ramon-based Meridian Property Company has paid $10.5 million to acquire the 74,000 square foot The Atrium office building at 5776 Stoneridge Mall Road in Pleasanton from Los Angeles-based Downtown Properties.
The new owner was attracted to the property in no small part because the location has a major re-leasing opportunity. “Even though the property is now 100 percent leased, there is the fact that 60 percent of the leases will roll in the next 24 months. When this is combined with [the fact] that the existing leases are 15 percent below market, it gives us a change to add value to the property in the near term,” says John Pollock, chief operating officer for Meridian Property.
The property was acquired at an 8 percent cap rate. “This yield is based on the current net operating income in the property,” says Joe Christ, an acquisitions manager for Meridian Property.
The Atrium was designed to house a large number of small tenants; the 1982-vintage building has a total of 57 tenants.
Meridian Property is a long-term believer in Pleasanton. “This is an area where we think there will continue to be economic growth. It’s our opinion that the rental rate growth in the area for office buildings this year should be in the range of six to seven percent,” said Pollock.
Meridian Property is a division of Marcus & Millichap Company. Its capital source on the deal in Pleasanton came from its parent company. The property was acquired on an all-cash basis. At some point in the future, the buyer will put some debt on the property.
Meridian Property is continuing to look for additional investments in the Bay Area. It’s working on its next deal, the purchase of an office building in Berkeley that could have a closing in a couple of months.
The buyer is a value-added investment player. It prefers to invest in a mixture of traditional office buildings and medical office assets. Most of its deals are with properties that fall in the range of 40,000 to 150,000 square feet.