By Jon Peterson
San Francisco-based Swift Realty Partners has paid $40 million or $129 per square foot to acquire the 309,235 square foot Community Towers office buildings at 111 West St. John Street and 111 North Market Street in San Jose. This was an all-cash deal with the buyer planning to put some debt on the asset in the near future.[contextly_sidebar id=”500e681d7120fc1b6ef1c723e14843a8″]The buyer liked the price on the property. “Our price point is very attractive. There was another office building two blocks away that had a much higher price point. This was the 225 West Santa Clara asset that was priced at $438 per square foot,” says Christopher Peatross, founder and president of Swift Realty.
225 West Santa Clara was acquired earlier this year by Des Moines-based Principal Real Estate Investors and Emeryville-based Harvest Properties.
Peatross liked where his property stands from an occupancy standpoint. “Our property is now 94 percent occupied. This means that we already have a captive audience they we can focus our efforts on. It’s not like we have to go out and re-lease a majority of the space to brand new tenants,” he said.
This level of occupancy is important given the previous ownership. “The property had been owned by a non-institutional owner. This was a private family and the asset was then given back to a group of banks. I think it’s significant that this scenario occurred and the property was still able to keep its occupancy at a high level,” said Peatross.
The lead bank that took over ownership of the property was the Canadian Imperial Bank of Commerce. It sold the property with the assistance of the San Francisco office of HFF.
“This property represents a true value-add investment opportunity for the buyer. The existing rents in the property are now at 35 percent below market rates. The cap rate on this transaction based on the current rents is in the high 5 percent range,” says Steven Golubchik, a managing director with HFF. The other two brokers in the deal were Nicolas Bicardo, managing director, and John Simerlein, a director.