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3 notable Sonoma, Marin commercial real estate sales

A Marin County-based investor group purchased a 66,200-square-foot office building in downtown Santa Rosa for $12.4 million.

The group, 851 Irwin Street, LLC, led by Richard Hall of Ross, purchased the Westamerica Bank–anchored building Aug. 10 for the equivalent of $187 a square foot. That's on the low end of per-square-foot building sale prices for comparable buildings in the area because it was more than 20 percent vacant at the time of sale, had a lot of deferred maintenance and some tenants were on shorter-term leases, according to Paul Schwartz of Terra Firma Global Partners.

He represented the buyer. The seller was Burlingame-based Upway Properties, LLC.

But two leases since the sale have brought occupancy up to 88 percent, and three prospects are looking at the four remaining suites of 1,500–3,800 square feet.

“I have not seen that in a while,” Schwartz said. “It's indicative of the market right now. The office market has picked up.”

In the past three years, there has been a gradual increase in demand for office space, he said. What's of interest these days are suites of 2,000–5,000 square feet.

SIZABLE SALES IN THE NORTH BAY

The rate of vacant office space in Santa Rosa was 12.5 percent of 7.2 million square feet at the end of the second quarter of this year, according to brokerage Keegan & Coppin Co. Inc./Oncor International. That's down from 13.7 percent a year before and a plateau of around 16 percent from 2011–2015.

The roughly dozen tenants in the 4-story 111 Santa Rosa Ave. building other than Westamerica include Meridian Management Group, accounting firm Bollinger Glenn Guattery Gunn & McAravy, law firm Mullen & Filippi, Home Point Financial and Abitration & Mediation Center. Newcomers are Guild Mortgage and Pennsylvania-based AnswerNet, which is relocating its Santa Rosa call center to 5,600 square feet in the building around the end of this year.

The new owners of the building have started some of the planned upgrades to the inside and outside to help fill up the rest of the building, Schwartz said. Signage has been updated, and the lobby and hallways are being evaluated for lighting and cosmetic revamps.

The 851 Irwin entity was formed in 2008 by LRG Capital Group of Larkspur. The investment entity also purchased the 46,000-square-foot Sportsman's Warehouse store building at 5195 Redwood Drive in Rohnert Park. That deal was recorded Aug. 3 of this year for an undisclosed amount. Tiffany Manor, LP, led by Mill Valley real estate broker Mark Cunningham, was the seller.

There have been a couple sizable North Bay office properties sold in the past few months, according to real estate information service CoStar. Meridian Commerical's Samuel Ko represented North River Co. in the purchase of the 45,000-square-foot office building at 1299 Fourth St. in San Rafael from Diversified Equity Holdings, LP, on June 21 for $14.5 million, or $322 a square-foot. Nashville-based Healthcare Realty Services Inc. bought the 75,600-square-foot medical office building next to Sutter Sonoma Regional Medical Center north of Santa Rosa from Sutter Health for $26.8 million, or $354 a square foot, on June 12.

RALEY'S TOWNE CENTRE

Rohnert Park-based Codding, which has built hundreds of homes and millions of square feet of commercial space in the North Bay since the 1940s, including Coddingtown Mall in Santa Rosa, has been selling a few commercial properties in Rohnert Park this year.

The largest of them is the Raley's Towne Centre, a 142,000-square-foot neighborhood shopping center anchored by a Raley's grocery store and on State Farm Drive between Enterprise Drive and Rohnert Park Expressway. It was sold to ARGP RP Towne Center, an affiliate of Corte Madera-based Argonaut Investors, and Salt Lake City-based New Decade, LLC. The estimated sale price was $25 million.

The center is about 96 percent occupied.

Argonaut's 2.5 million-square-foot shopping-center portfolio in five states already includes another Codding project in Rohnert Park: North Bay Centre, a retail center at the southwest corner of Commerce Boulevard and Rohnert Park Expressway. The investor bought it in 2005 and since has brought in anchor tenants 24 Hour Fitness and Grocery Outlet as well as a Chipotle restaurant and a Panera Bread shop.

“I'm a big believer in the North Bay, and we like the community,” said managing partner Steve Jaeger. “We believe Rohnert Park and the Sonoma County area are really headed in one direction, and that's positive. We felt that was a good long-term opportunity.”

Argonaut owned the Mountain Shadows Plaza neighborhood center in the northeast part of the city years ago.

Despite the retrenchment by large-store retailers Sears, JCPenney, Macy's and Nordstrom, Jaeger is optimistic about the future of retail real estate.

“There is a long view for bricks-and-mortar retail,” he said. “Necessity-based retail that provides goods and services needed daily isn't going away, even with Amazon.”

He sees Amazon's purchase of Whole Foods Market to get into local-service grocery as underscoring that retail real estate needs a combination of somewhat “internet-proof” tenants. That's why Argonaut has pursued grocery, drug-store, soft goods and fitness tenants.

Argonaut has nine employees in the main office plus on-site staff in various location. It will be expanding to 13 next year. The company does its own property management for the nearly $500 million in portfolio assets.

San Francisco-based Cushman & Wakefield agents Dan Wald and Don LeBuhn were involved in the May 26 sale of Raley's Towne Centre.

PINI HARDWARE BUILDING

For more than a decade and a half, San Francisco-based Prado Group brought forward multiple proposals to revitalize the 20,000-square-foot former Pini Ace Hardware building at 1107-1109 Grant Ave. in Novato, but it has passed the torch to a Marin County-based group that is considering redevelopment.

Prado sought to bring in book retailers for the space, but those prospects fizzled. Pini, started in 1946 finally left the building in 2004. Two years later, Prado had Monrovia-based Trader Joe's interested in buying it for a store, but the developer ended up building that store on a nearby property.

Four years ago, Prado floated the idea of building a multiplex theater and parking garage on the site.

On June 30 of this year after three months of negotiations, Prado's ownership entity for the property, 1107 Grant, LLC, sold it to Bromich, LLC, for $2.6 million. The purchase was part of a tax-deferred exchange, according to Bryan Vidinsky of Cushman & Wakefield. He represented the buyer, and Steven Leonard of the same brokerage represented the seller.

The buyer group are three local investors who have undertaken projects in San Francisco and Marin. One of them, Mike O'Mahoney, said schematic drawings are being drafted for a decision hopefully this fall on a direction for the project.

“We're going to do a mixed-use project with commercial (space) and apartments,” he said. The housing would be on the second floor.

Novato-based architect Dan Macdonald has been advising the new owners on options.

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers the wine business and commercial construction and real estate.

Corrections, Sept. 20, 2017: Paul Schwartz represented the buyer of the 4-story 111 Santa Rosa Ave. building in Santa Rosa.

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