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Santa Rosa investor plans 50% real estate portfolio expansion

A Santa Rosa-based commercial real estate investor with millions of square feet has a new president as the company plans to increase the value of its portfolio by 50% by the end of next year.

STG Group in November promoted Jim Ballard to president, and John Ziegler retained the role of CEO he’s had since starting the company in 1985. Ballard came to STG 15 years ago as director of acquisitions and leasing after working for six years as a commercial real estate agent in San Francisco for a brokerage that’s now called Newmark. Seven years ago, he was promoted to managing director.

“We're definitely on a trajectory of trying to increase our portfolio,” Ballard said. “We will continue to go down the path of what's provided us success over the past, and that's multitenanted industrial, retail and office complexes. That business plan has helped us succeed over the last few decades, so moving forward, we will continue down that same path.”

Today the portfolio totals roughly 4.5 million square feet mostly in Western states, including about 400,000 in the North Bay, from Petaluma north into Santa Rosa. Notable local holdings are the 60,000-square-foot Fountaingrove Corporate Centre I office building at 3510 Unocal Place in the Fountaingrove area of northeast Santa Rosa and a warehouse in the city that used to house Sports City indoor soccer and athletic fields until that organization’s 2016 relocation to the Epicenter entertainment complex in the city.

The portfolio was recently valued at about $800 million, and the goal is to expand the holdings to $1.2 billion in the next 12 months, Ballard said.

“We’re in an aggressive expansion phase now, so we are looking for projects,” he said.

And while STG hasn’t added to its North Bay real estate holdings in the past several years, the company has been in growing elsewhere. After a move into the Denver region four years ago, the firm made another eastward expansion this year. This past spring and fall, STG purchased two smaller neighborhood shopping centers — one with 31,000 square feet and 90% occupancy at the time of sale and another with 23,000 square feet and 70% occupancy — in the Chicago suburbs of Lake Barrington and Barrington, Illinois. STG has commissioned upgrades to the retail space.

STG this year also purchased nearly 249,000 square feet of flex and industrial buildings in the Skokie suburb on Chicago’s North Side.

“We’ve started gravitating to outlying markets we see as a little stronger,” Ballard said.

The Skokie Industrial Park purchase was attractive because they were flex buildings — light-industrial, with significant office space potential — in a tertiary market to downtown Chicago. And Barrington is an affluent area, which tend to result in stable tenants in properties, Ballard said.

But the Midwest is attracting STG’s investment attention because that part of the U.S. plays a critical part in the east-west movement of goods, and labor and materials are less expensive than they are on the West Coast, he said. And demand for last-mile delivery of goods bought online is increasing demand for industrial facilities, Ballard said.

STG prefers to invest in the San Francisco Bay Area, to keep holdings closer to home. But the company’s last North Bay purchases of note were of 3510 Unocal in 2017 and 168,000 square feet in five Santa Rosa office buildings from architect-developer Larry Simons in 2014. STG hasn’t actively pursued industrial buildings in the hot Napa and Solano counties market because competition among investors there is “fierce,” Ballard said.

The company has a subsidiary that takes care of properties, STG Asset Management. Occupancies portfolio-wide have been above 90% for the past six years, including during the pandemic, Ballard said.

“We’ve had dialogue (with our tenants) to understand their problems and find out how we can help,” he said.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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