Walton Street Makes $70MM Parking and Office Asset Investment in Bay Area

Walton Street Capital, San Mateo, San Francisco, Santa Barbara County Employees Retirement System, Bay Area news, San Francisco real estate

By Jon Peterson

Chicago-based Walton Street Capital has paid a total of $69.8 million to acquire a parking garage in San Francisco and an office building in San Mateo, according to a document from the Santa Barbara County Employees Retirement System.

1850 Gateway
1850 Gateway Drive in San Mateo

The real estate fund manager has put down $22.8 million or $54,500 per stall to buy the 418-space 1000 Van Ness Garage in San Francisco. It also has purchased the 143,000 square foot San Mateo Plaza office building for $47 million or $330 per square foot. This asset is located at 1850 Gateway Drive.

Eric Mongentale, a managing principal with Walton Street, stated in an e-mail that the company does not make comments or discuss the confidential information for new investments.

Walton Street acquired the parking garage from Northbrook, Ill.-based Next Realty. The listing agent on the sale was HFF out of its San Francisco office, according to sources familiar with the property.

It was stated in the document from Santa Barbara County that the business plan for the parking garage is to take advantage of increased demand with the current development of the Cathedral Hill Hospital, which is approximately one block north of the garage.

The brokerage community is in line with this thinking and sees other demand drivers in the area. “This garage is part of a mixed-use asset that has a good amount of demand for parking. 1000 Van Ness has a mixed-use property owned by DDR Corp. that has a health club and a theater. There also is a residential condo portion of the property,” says Erik Hanson, a vice president with Colliers International in its San Francisco office.

The retail owned by Beachwood, Ohio-based DDR Corp. totals 122,844 square feet, according to its Web site. This includes a 74,000 square foot AMC Theatre and a 26,517 square foot Studio Mix health and fitness center.

The office building in San Mateo has a value-added component. According to the Santa Barbara County document, the business plan for Walton Street is to implement a value-added strategy by leasing up the remaining 30 percent vacancy in the property.

This property is located in an office market that for all classes totals 7.3 million square feet and has 100 buildings, according to the research and forecast report for the first quarter of 2014 by Colliers International. Vacancy for these assets was 11.2 percent for the current quarter and had stood at 10.8 percent for the prior quarter.

Walton Street acquired both of the properties in the Bay Area for its commingled fund, Walton Street Fund VII. This commingled fund was formed in May 2012. Through the end of last year, it had a gross real estate value of $968.2 million.

Fund VII is a non-core investment fund. It makes equity and debt investments in real estate related assets and real estate operating companies through value-added and opportunistic investment strategies. It has made 18 investments through the end of last year. The largest component of the fund is office buildings, which represent 59 percent of the portfolio.

Santa Barbara County made a $7.5 million commitment into the commingled fund in 2012. Assets in the Pacific region amount to 20 percent of the Fund VII portfolio. The only part of the country with a bigger presence is the Northeast with a 25 percent allocation.

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