By Jon Peterson
Houston-based PM Realty Group and Boston-based The Roseview Group have made its first acquisition in Northern California for its Roseview-PMRG Fund I. They acquired the 1 & 3 Harbor Drive buildings in Sausalito for $34.8 million, or $304 per square foot, according to public documents.
PM Realty Group declined to comment on the purchase price due to a non-disclosure agreement it signed with the seller, Equity Office. This real estate owner had sold the property through the JLL Capital Markets Group in its San Francisco office. Involved in the sale were Managing Directors Michel Seifer and Rob Hielscher as well as Erik Hanson, vice president. JLL declined to comment on the sales price when contacted for this story.[contextly_sidebar id=”r2J4y6UnZIzPlvPksVLIsBbEW8GXGyML”]The two-building office complex totals 114,314 square feet. The property was built in 1982 and was 81 percent occupied at the time of closing. “This level of occupancy was a little lower than the overall market occupancy for southern Marin County. The main reason for this is that within the last two years Glass Door, which was a major tenant in the property, left the for another location,” says John Dailey, executive vice president with PM Realty.
He believes there is a strong repositioning opportunity with this property. “I think the property looks tired in its current condition, and it doesn’t give off the vibe of Sausalito. We are going to try to change this in the future,” said Dailey.
There will be a chance to add some value by bringing rents up to market in the property. “I would think that the current rents in the property are anywhere from 15 percent to 20 percent below market. This gives us an opportunity to add some value to the buildings down the road,” said Dailey.
JLL sees the two buildings being strong assets. “This is one of the best quality institutional assets in Sausalito, which is the first stop over the Golden Gate Bridge for tenants moving north out of the city. The property is in an excellent location close to freeway access and important amenities such as cafes, restaurants and shopping and drew strong investor interest,” said Seifer in a prepared statement.
Roseview-PMRG Fund I has a total capitalization of $250 million. The leverage component on the fund is between 65 to 70 percent. The capital source for the fund is a separate account with a major corporate pension fund based in the United States.
PM Realty Group for the investment fund is looking to invest in value-add office assets around the country. Most of the acquisitions for the fund are somewhere in the range of $20 million to $40 million. It typically seeks properties that can produce a mid-teens IRR over the length of the investment.
The investor looks to only place capital into existing assets. It looks to buy the asset, make the appropriate changes and then sell the property when the business plan is completed. This can take anywhere from three to seven years. PM Realty is looking for additional transactions all over the Bay Area from south of San Francisco, Marin County and in Oakland. The company is an active investor in many markets around the country, including markets like Atlanta, Tampa and Houston.