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North Bay Business Journal

Monday, January 10, 2005, 3:00 am

Landmark office building sold

New owner plans extensive overhaul

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    A Bay Area investment group has purchased the three-story 105,000sf red-brick façade office building fronting U.S. 101 in north Santa Rosa from Washington Mutual. The buyer plans to transform the corporate headquarters location, which has housed some of Sonoma County’s largest companies, into a multi-tenant office campus with potential for complementary new commercial space and housing.

    The Buyer, Urdang/Sequoia Creek Holdings Santa Rosa LLC, purchased the building located at 3883 Airway Drive, on December 30. Paul Gonzalez of BT Commercial represented the buyer, and Shawn Johnson of Keegan & Coppin represented the Seller.

    Santa Rosa-based investment firm B&G Group also has a minority stake in the buying entity. In an interesting twist, B&G president and CEO Luhkbir Gill landed his first Sonoma County job 20 years ago as a file clerk in the building for IMCO Realty Services.

    Parties involved in the building sale declined comment on the value of the transaction.

    According to Sonoma County Recorder’s Office documents, Urdang/Sequoia Creek finances $17.04 million of the acquisition, which equates to a low market $162/sf for the office space alone. Real estate sources say Seattle-based Washington Mutual was asking as much as $18 million for the 17-acre property, including the building and 10 acres of adjacent vacant land.

    Washington Mutual is leasing the 20,000sf it occupied on the first floor before the sale.

    Repositioning planned

    The buying group, led by Danville-based private equity fund Nearon Enterprises LLC, plans to update the 22-year-old building and is exploring options for the rest of the property, according to managing member David Zeff of Nearon. The firm brought in Pennsylvania-based Urdang Capital Management, which specialized in funding acquisitions of undervalued commercial properties for rehabilitation.

    “We plan to reposition the building with class-A-quality improvements to create Santa Rosa’s premiere office environment and develop the excess land to create a unique mixed-use environment,” Mr. Zeff says. Nearon’s other local holdings are the Burlington Coat Factory property in Rohnert Park and Northpoint Corporate Center in southwest Santa Rosa.

    Possible changes to the property include relocating the parking lot to the front of the building from the side, building medium-density (15 or fewer units per acre) duet-style town homes, converting the 4,000sf cafeteria into a smaller bistro, and creating space for other commercial amenities. The building can be subdivided as small as 1,500sf or accommodate tenants as large as 60,000sf.

    Asking full-service rents range from $2-$2.25/sf with a “significant” improvement package. Mr. Gonzalez, Greg Moss, and Jeff Negri of BT commercial are marketing the building.

    Demand picking up

    Nearon isn’t the only one positioning itself for an anticipated increase in demand for office space, despite a Santa Rosa-area office vacancy rate in the mid teens. For example, Petalumabased Basin Street Properties has been acquiring properties around the city and has a half-leased 40,000sf office building under construction across the highway from 3883 Airway.

    What those owners and developers are eyeing is pent-up demand that is starting to vent, according to Keegan & Coppin vice-president Jim Keegan. In the last two weeks of 2004, during the typically quiet holidays, Keegan & Coppin closed 32 leases and sales, its busiest two-week period since late 2002.

    “2005 will be a good year [for company real estate deals], even if interest rates creep upward,” Mr. Keegan says.

    The 3883 Airway building is a symbol of Sonoma County’s coming of age as a corporate home, according to Mr. Keegan. Wells Fargo Bank purchased Sonoma Mortgage Company from Henry Trione around 1970. In the mid 1970s, Wells Fargo renamed the operation Wells Fargo

    Mortgage and moved it so San Francisco, cutting hundreds of jobs. In the early 1980s, Dorothe Hutchinson, senior vice-president at the time, persuaded Wells to build 3883 Airway and return.

    Wells Fargo Mortgage became IMCO Realty Services in the mid 1980s, then North American Mortgage Company when it went public in 1991. North American Mortgage at one point had more than 1,000 employees in the county and 3,000 nationwide. Dime Bancorp acquired North American Mortgage in 2000, then Washington Mutual merged with Dime in 2002.

    Keegan & Coppin partner Kevin Canady, now deceased, represented the occupants of that building in local and national real estate deals going back to the acquisition of the land by Wells Fargo Bank in 1982.

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