By Jon Peterson
San Francisco-based Ridge Capital Partners has put under contract the acquisition of the PMI Plaza office building located at 3003 Oak Road in Walnut Creek. The purchase price is going to be $66 million or $325 per square foot, according to sources that track the sale of office buildings in the region.
The sale of the property is being done through an entity known as PMI Holdings. They are being represented in the sale by the San Francisco office of Eastdil Secured. Stephen Van Dusen, a managing director with the company, declined to comment on the sale when contacted for this story.
Ridge Capital preferred not to comment until the acquisition closes, which would likely occur sometime over the next few weeks. The real estate investment company is acquiring the property along with its capital source, Westbrook Partners. The opportunistic fund manager is based out of New York City, although it does have a regional office in San Francisco at 1 Embarcadero Center.
Westbook is mostly known as a value-add or opportunistic real estate manager that looks to invest in real estate at prices significantly below replacement cost. The pricing to be achieved on 3003 Oak Road is well below the $500 per square foot replacement cost to build new office space in Walnut Creek, as stated by sources familiar with the office building market in Walnut Creek.
There is going to be some significant rollover of leases in the property by 2019—at least 50 percent of the building. The existing rents in the property are well below market rental rates. The cap rate on the planned sale would be in the low six percent range, as stated by sources aware of the sale of the asset. This return is calculated using the property’s current net operating income.
3003 Oak Road was developed in 2003. The asset has a current occupancy in the low 90 percent range. The property has a very strong location given that its located across the street from a BART station, giving employees good access to public transportation.