By Jon Peterson
San Francisco-based Swift Real Estate Partners sold nine properties in 2016 for a total of $282 million or $289 per square foot. These same properties had been acquired by the real estate investor over the previous few years for $172.7 million or $177 per square foot.
Six of the nine transactions were located in the San Francisco Bay Area. The other three properties were two properties in Portland and one in Irvine.
The Bay Area property that created the most significant value change was the sale of the 158,605 square foot 1265 and 1272 Borregas in Sunnyvale. This property was acquired for $29.5 million in August of 2013. It was sold last year for $73.1 million.
“After we acquired the property, we invested an additional $9 million to reposition the interiors and outdoor amenity areas,” says Chris Butz, vice president of asset management for Swift.
Last year, 1265 was sold vacant to CBRE Global Investors. Separately, 1272 was sold off-market to a trade buyer at 100 percent occupancy. Eastdil Secured’s Silicon Valley office advised Swift on the disposition of the asset. “We identified an opportunity to match a high quality, recently leased investment opportunity with a 1031 Exchange buyer who we were looking with to place funds from a prior sale,” said an Eastdil representative.
Another asset that achieved significant value creation was the sale of the 111 Market Square in San Jose. The 320,559 square foot office building had been foreclosed by the lender and purchased by Swift for $40 million. The sales price of the property was around $65 million, according to sources familiar with the transaction. “When we acquired the project, it was 84 percent occupied. We then leased it to 93 percent occupied at the time we sold it in November. There was steady rollover in the building, which provided the opportunity to “market to market” much of the project during our ownership period. We addressed capital expenditures at the outset of our ownership and then capitalized upon the improving submarket dynamics largely generated by the surrounding amenity base,” said Butz.
Swift was an equally active buyer of properties in 2016 with a total acquisition volume of $244.6 million in eight transactions. The real estate investor’s most recent Bay Area acquisition was the $27.4 million purchase of the 146,763 square foot Creekside Business Park in Dublin.
“While this asset presents a lease-up opportunity for Swift, at 66 percent occupancy we were able to buy it with in-place cash flow and strong tenants including PG&E and Verizon. We liked the fundamentals within this submarket, and think there will be strong tenant demand for this type of space in the market,” said Butz.
Swift figures to be active buyer of additional assets in 2017 and beyond. The company has approximately $300m of capital available to invest in additional acquisitions over the next couple of years, which could translate into nearly $1 billion of real estate. Swift will continue seeking value-add office deals in the Northern California, Southern California, Seattle and Portland.