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North Bay Business Journal

Wednesday, October 10, 2012, 5:48 pm

Basin Street buys back 17 Santa Rosa buildings

Plans to invest $6 million over five years in upgrades

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    SANTA ROSA — Basin Street Properties has regained its position as the largest owner of commercial real estate in Sonoma County with the repurchase of 17 Santa Rosa office buildings it sold seven years ago.

    Fountaingrove Center

    The 161,000-square-foot, three-building Fountaingrove Center property is one of six Santa Rosa office complexes Basin Street Properties re-acquired from Equity Office in early October. (photo credit: Basin Street Properties)

    Reno, Nev.-based Basin Street (707-795-4477, basin-street.com), as SR Office Properties, LLC, purchased nearly 700,000 square feet in six locations from entities controlled by Chicago-based Equity Office on Oct. 3. Basin Street acquired or built these properties just more than a decade ago and sold them to Equity Office as part of a 1.43 million-square-foot sale of 44 buildings in Sonoma and Marin counties for $263 million, or nearly $184 a square foot.

    The purchase price wasn’t disclosed in public records, but Basin Street President Matt White said it was about half of what those buildings sold for in 2005.

    A recent deal of similar scale was the $65 million-plus sale of 842,000 square feet in 14 office, industrial and retail buildings in Petaluma and Rohnert Park earlier this year to an investment group led by Napa-based PB&J Acquisitions.

    Combined, the 17 Santa Rosa buildings Basin Street repurchased are 77 percent leased. They range from the totally full at Airport Corporate Center by Charles M. Schulz–Sonoma County Airport, to about three-quarters full at Fountaingrove Center and a second building at Fountaingrove Executive Center to just over half full at The Lakes Corporate Center in southwest Santa Rosa.

    “We know the market so well and know so many of our customers in the market,” Mr. White said. “We assembled that portfolio in early 2000s very consciously.”

    Because the cost basis for the newly repurchased buildings is so low and even below what it was before the 2005 sale, Basin Street plans to spend $6 million in capital improvements over the next five years, including $4.5 million in the next two, on landscaping, new roofs, heating and air-conditioning systems, and common areas, according to Mr. White.

    Since early 2011, Basin Street purchased more than 1 million square feet of office space in 25 Santa Rosa and Petaluma buildings, all but two of which were part of the 2005 sale. Basin Street now owns 1.8 million square feet of commercial property in Sonoma County.

    “A local developer … believed strongly enough to make a significant investment back into this county,” said Shawn Johnson, managing partner of Keegan & Coppin/ONCOR International and the local listing agent for Equity Office. “It bodes well for this county.”

    After the 2005 office portfolio sale, Basin Street invested in multifamily, hospitality and retail properties in the North Bay, Sacramento area and Reno, where it relocated its headquarters in 2009. As the economic recession dramatically slowed demand for office space, Basin Street started making inroads back into North Bay properties, including a joint venture on Petaluma Marina Office Center in 2009.

    Equity Office has been adjusting its portfolio to focus on core markets, which in the Bay Area is the Peninsula and South Bay, according to a spokesman. Equity Office declined to comment further on the latest transaction.

    In 2010 and 2011, 18 Equity Office office and industrial-flex buildings in Petaluma and Santa Rosa went back to lenders, 15 of which Basin Street sold in 2005. While the subsequent purchase of those buildings for as little as a quarter of the 2005 average per-square-foot sale price led to a significant reset in Petaluma office rents and property values for a time as new owners competed aggressively for tenants, a repeat is not planned for Santa Rosa, according to Basin Street Vice President Scott Stranzl, who oversees leasing.

    Basin Street is hiring seven for a new Santa Rosa portfolio property-management office and three back-office support personnel at the Reno headquarters to handle the new properties.

    The Santa Rosa offices of Keegan & Coppin, Cornish & Carey Commercial Newmark Knight Frank and Cassidy Turley will be marketing Basin Street’s latest Santa Rosa additions.

    Michel Seifer, Rob Hielscher and Aaron Herter of Jones Lang LaSalle also represented Equity Office in the Santa Rosa portfolio sale.

    Santa Rosa portfolio sale details

    Buyer: SR Office Properties, LLC

    Seller: Several limited partnerships managed by Equity Office: CA Airport Center LP, CA Fountaingrove Center LP, CA Fountaingrove Executive Center Phase I LP, CA The Lakes LP, CA Oak Valley Business Center LP and CA Waterfall Towers LP

    Sale date: Oct. 3

    Office buildings: 17

    Square footage: 697,500

    Purchase price (estimate): $65 million

    Planned capital projects: $6 million over five years

    Occupancy: 77 percent

    Lender: Wells Fargo Bank

    Airport Corporate Center

    3850 and 3880 Brickway Blvd., Santa Rosa

    Two buildings, 128,540 square feet

    Fountaingrove Center

    3550, 3554 and 3558 Round Barn Blvd., Santa Rosa

    Three buildings, 161,055 square feet

    Fountaingrove Executive Center

    3700 Old Redwood Hwy., Santa Rosa

    One building, 37,428 square feet

    Oak Valley Business Center

    451, 463 and 475 Aviation Blvd., Santa Rosa

    Three buildings, 131,725 square feet

    The Lakes Corporate Center

    2225, 2235, 2245 and 2255 Challenger Way and 2227 Capricorn Way, Santa Rosa

    Five buildings, 140,645 square feet

    Waterfall Towers

    2455 Bennett Valley Road, Santa Rosa

    Three buildings, 95,056 square feet

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