By Jon Peterson
The sale of a nearly 90,000-square-foot Redwood City office complex has earned the seller a more than $14 million profit after less than 30 months.[contextly_sidebar id=”921080bb77f21f217b26b3e1325c419b”]Los Angeles-based Kennedy Wilson has just paid not quite $22 million, or nearly $246 a square foot, to buy The Pointe at Redwood Shores office buildings at 1201 Radio Road and 1235 Radio Road, according to the company.
The seller was a joint venture of San Francisco-based Premia Capital and New York City-based Angelo Gordon & Co. The duo bought the property vacant in late 2010 when they paid $7.48 million, or not quite $86.50 a square foot, for the asset, according to research from Cassidy Turley Commercial Real Estate Services.
The buyer paid cash and is in the process of arranging debt.
The property trade produced a first-year capitalization rate in the low 6 percent range. “This return is based on the net operating income being produced in the property now,” said John Prabhu, president of KW Commercial Investment Group. Prabhu worked on the acquisition for the company. “I would suspect that the leverage will be in the range of 65 percent.”
Michael Halow, founder of Premia, said the company’s original plan was to re-populate the building and to make them financially stable. “We did that. The property is now 80 percent occupied. We think that the market timing was right for a sale,” he said.
The Pointe at Redwood Shores was built in 2000. Massachusetts-based AB Sciex, which makes scientific analytic tools including instrument systems, software and chemistry reagents, has a sales and service center at 1201 Radio Road. BioCentury Publications Inc., which provides information for the life sciences and pharmaceutical industries, is a tenant at 1235 Radio Road.
Kennedy Wilson has seen the Class A office market in Redwood Shores improve significantly over the past two years. “Rental rates have gone from the low $20 a square foot for gross full-service on an annual basis to now being in the mid $30s. This market is attracting tenants who are being priced out of either San Francisco or Silicon Valley,” Prabhu said.
Mike Moran, a managing partner in the Burlingame office of Cassidy Turley, agreed. “The Class A space in Redwood Shores has had a very strong run over the past couple of years. There have been good improvements made for both occupancy and rental rates,” he said.
Kennedy Wilson has been relatively quiet in the purchase of office buildings in Northern California. It owns 300 California St. in downtown San Francisco and the Oakland Airport Plaza at 303 Hegenberger Road and 333 Hegenberger Road near the Oakland International Airport.
“We are looking to buy more office buildings in the Bay Area in San Francisco, Silicon Valley and the North Bay. Our typical deal size would be in the range of $30 million to $75 million,” Prabhu said.
Kennedy Wilson has been a much bigger player in apartments in the Bay Area. Through its KW Multifamily Management Group, the firm has acquired three apartment complexes in the East Bay over the past year.
Halow formed Premia in 2009. He had been with San Francisco-based JMA Ventures before that for eight years. Premia’s current office portfolio stands at 275,000 square feet. These properties include assets in South San Francisco and Redwood City. “We are a value-add office investment company. The goal for us is to complete a couple of transactions every year. We can use either private or institutional capital partners,” Halow said.
Holliday Fenoglio Fowler L.P. in its San Francisco office represented the seller. The listing agent was director Dave Karol. The brokerage would not comment beyond stating that it was the broker.
Photo courtesy of ABAG