By Jon Peterson
San Francisco-based Rubicon Point Partners has acquired its first property in San Bruno with the acquisition of the approximately 150,000 square foot The Lakes at Bayhill. The purchase price was around $300 per square foot or $45 million.[contextly_sidebar id=”GKcYiF7wRZzy4YUyBApXuctNx72AFK28″]The seller of the property was San Francisco-based Ellis Partners. Both the buyer and seller declined to comment on the financial terms of the transaction.
“I think that the San Bruno market is one that is attractive as it gets overlooked by many institutional investors, which should allow us to buy at a reasonable price. We have seen this situation occur in other markets in the Bay Area in the past like the Mid-Market area in San Francisco and downtown Mountain View,” says Ani Vartanian Boladian, a managing partner with Rubicon Point Partners.
The buyer sees that there is a value-added component to The Lakes at Bayhill, even though the property is 97 percent leased. “We believe that we should be able to add significant value to the property in the future. This is because the rents in the property are significantly below market rents and 50 percent of the current tenants in the property will have leases coming up for renewal in the next two to three years,” said Vartanian Boladian.
The Lakes at Bayhill was first developed in 1976. The project covers 6.4 acres and has three Class-A buildings in a park-like setting. Its major tenant is Cord Blood Registry, which occupies 22 percent of the property. Other tenants are Google, Walmart.com and Oracle, they occupy roughly 57 percent of the property.
The office building is located within San Bruno’s Bayhill Office Park. Rubicon has seen the sub-market achieve strong rent growth over the past 12 months. “Rents in the sub-market have moved up over the past year. They were at $2.75 per square foot full-service last year. They are now at $3.35 per square foot, and EOP has moved rents in their portfolio to $3.45 per square foot,” said Vartanian Boladian.
The overall performance of the San Bruno office market has been strong. “San Bruno remains a very tight office market. It’s 96 percent leased with no land available for new development,” said Vartanian Boladian. This market has a total of 1.4 million square feet covering 14 buildings.
The capital for the acquisition of The Lakes at Bayhill came from the Canyon Catalyst Fund. This is the emerging manager investment platform funded by the California Public Employees Retirement System. The manager on this investment entity is Los Angeles-based Canyon Capital Realty Advisors.
Rubicon is looking to buy a mixture of office and industrial properties in Northern California for this relationship. The company looks to buy properties that are located in markets that are showing strong job formation.