By Jon Peterson
Waters Technology Park I and II in San Mateo are up for sale, according to sources that track the sale of office buildings in San Mateo county. The assets total 101,358 square feet and are located at One and Two Waters Park Drive. The fee simple interest in the properties is being offered for sale without an asking price on an all-cash basis.[contextly_sidebar id=”gL3Mf7J9hhuZ3xY4cpG1ve5otNQ2yVg1″]Cushman & Wakefield is overseeing the sale of the two buildings, and the listing agents on the sale include Steve Hermann, executive managing director in the San Francisco office, and Eric Fox, an executive managing director in the San Jose office. According to public documents, the property is owned by Realty Associates Fund VIII, an entity affiliated with Boston-based private equity firm TA Associates. The fund purchased the asset in 2007 for $27,350,000, or approximately $270 per square foot.
The property, which was built in 1979, is considered a core plus asset, with the two buildings having a total combined occupancy of 87 percent. There is a solid and diverse cash flow being produced by the property presently, with the lead tenant in the property being Adap.tv, an entity owned by Verizon Communications. It has a 38,000 square-foot lease that runs until February of 2019. This space covers approximately 37 percent of the complex.
There will be a possibility for the new owner of the property to add value to the asset in the future. The current in-place rents are around 15 percent below market and more than half of the project has leases that will expire over the next three years. The average asking rent in the region where the asset is located has increased for 13 consecutive quarters.
The San Mateo office market has been a strong performer over the past couple of years. According to sources that track this market, San Mateo’s vacancy has stood at 9.5 percent at the end of the first quarter for this year. This is approximately 80 basis points below the regional average. Average asking rates have grown 24 percent in the past two years from $3.43 full-service at the end of the first quarter in 2014 to $4.27 full-service presently. Current activity indicates that vacancy compression and rent escalations will continue for the rest of 2016.