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September 04, 2015

Clarion buys Sorrento Mesa technology park for $90 million

San Diego Source

Thor Kamban Biberman

A Clarion Partners entity has paid $90 million to buy the 550,000-square-foot Pacific Technology Park in Sorrento Mesa.

The upscale 30.82-acre industrial property consists of five industrial buildings at 9389, 9393, 9401, 9455 and 9497 Waples St.

Whether the 1990s-era property is Class A or Class B depends on who is ranking it. Cushman & Wakefield refers to the property as Class A; a CoStar Group assessment considers it Class B.

The purchasing entity was CLPF- Pacific Technology Park LP. The selling entity was Pacific Tech Property CBRE Investors, which in turn acted on behalf of an unidentified foreign investment fund.

The seller was represented by Mickey Morera and James Duncan of Kidder Mathews; and Jeff Shiate, Jeffrey Cole, and Edward Hernandez of Cushman & Wakefield. Clarion represented itself.

"This property in the heart of Sorrento Mesa has high bay storage that is the Ritz-Carlton of warehouse properties," Morera said. "It's meant for those who don't want to get down and dirty in Miramar. It's a nice environment."

A brochure on the property said the buildings are suitable for life science companies that could pay rents ranging from $2.50 to $2.60 triple net.

The brochure said the property is 80 percent full and leased to 13 tenants, but Morera said pending transactions would bring the property to about 91 percent leased.

The CoStar Group said the 96,812-square-foot building at 9477 Waples St., the 97,284-square-foot building at 9455 Waples and the 102,211-square-foot building at 9389 Waples were full at the time of the research firm's survey within the past month.

CoStar said the 115,986-square-foot building at 9393 Waples was 56 percent occupied and the 132,039-square-foot building at 9401 Waples St. was 56.3 percent occupied.

The Cushman & Wakefield brochure said that 51 percent of the mix is credit tenants such as Qualcomm, Raytheon,DexCom, Novartis, Thermo Fisher Scientific, Becton Dickinson, Verizon and Hologic.

"The offering provides a critical mass of scarce Class-A industrial assets located in a corporate business park environment with significant barriers to entry," the brochure said.

The property's land value is estimated at more than $40 per square foot and Sorrento Mesa's industrial vacancy stood at about 7.1 percent at midyear, according to the C&W brochure, after having dropped 120 basis points since the third quarter of 2014.

C&W also said it likes the way the leases at the Pacific Technology Park are structured.

"The assets provide a balanced lease expiration profile through 2024 with an average remaining term of 48 months," C&W wrote. "Only 41 percent of the rent roll expires through calendar year 2019. Average in-place rents are approximately 10 percent below market rent levels."

"A future value estimate on this basis could exceed $400 per square foot," the brochure added.

The five buildings are on three separate parcels "allowing for future individual building sales to users or investors," C&W wrote.

"The assets will likely sell at a discount to their estimated replacement cost of over $205 per square foot," the brochure said before the sale.

The actual sales price came at about $165 per square foot.

Four of the buildings, totaling 440,569 square feet, were sold for $60 million to a unit of Rreef Management in 2005, before that entity was bought by a Deutsche Bank corporation. CBRE Investors entered the picture at Pacific Technology Park later in the decade.

Clarion Partners has been heavily invested in the San Diego-area assets for many years. The McGrath Family sold nearly 300,000 square feet of retail assets last month at Clairemont Mesa Boulevard and Shawline Street to a commingled fund managed by Clarion for $107.15 million.

Clarion also owns the 115,296-square-foot One Del Mar office building on High Bluff Drive in Del Mar Heights, and has held interests in many San Diego-area apartments.

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