A $250 million real estate investment fund purchased a large southern Marin County office complex and plans to upgrade the property and rents to match the market.
The acquisition of the 114,314-square-foot 1 and 3 Harbor Dr. complex in Sausalito is the first in Northern California for Roseview-PMRG Fund I LLC, a discretionary fund formed by PM Realty Group and the Roseview Evergreen Fund buy and reposition office properties across the U.S., the partnership announced Feb. 19. The Roseview–PMRG partnership also owns five other properties in the Atlanta, Houston, Philadelphia, Boston and Tampa areas.
The purchase price was undisclosed, but public documents suggest the price was as high as $35 million.
The Feb. 16 sale of Harbor Drive Executive Park also is the last North Bay holding for Equity Office, a Chicago-based affiliate of The Blackstone Group that at one point owned roughly 2 million square feet in Marin and Sonoma counties.
The Roseview–PMRG fund plans to improve the asset, built in 1982, by investing about $2 million in a speculative suite program, upgrading interior and exterior common areas and adding a conference facility, bicycle storage area and on-site management office.
“We’re looking for a way for these buildings to scream Sausalito,” said John Dailey, executive vice president of PMRG. He said the impression he received on the first visit was that the property could be located in any metropolitan area. Instead, the goal is to leverage the existing courtyards to create an indoor-outdoor work experience popular with Bay Area creative firms. And there have been talks about tapping into the Sausalito marine and art communities to localize the look.
An architecture firm likely will be picked in the next couple of weeks and construction would begin as soon as city approvals are in hand, Dailey said.
The fund also wants to increase property value by leasing currently vacant space and increasing in-place rents to market rates as leases expire. Average full-service monthly rents in the property are about $3.20 a square foot, compared with roughly $4 a square foot for full-service office rents the surrounding area, Dailey said.
The space was 81 percent occupied at the close of escrow, according to listing agents Michel Seifer, Rob Hielscher and Erik Hanson of JLL Capital Markets Group. Major tenants include executive suites operator Regus, Aperio Group, Lifefactory and Westamerica Bank. The 20,000 square feet available is mainly courtyard-level space in 3 Harbor Dr., Dailey said.
“This property presents the fund with a rare opportunity to own a quality office property within supply-constrained Marin County,” said Steve Corridan, partner of The Roseview Group. “The area benefits by existing geographical barriers, a lack of available land and proximity to several of the nation’s most affluent communities.”
Harbor Drive is a quality institutional-grade asset located in “the first stop over the Golden Gate Bridge for tenants moving north out of the city,” Seifer said.
“The property is in an excellent location close to freeway access and important amenities such as cafes, restaurants and shopping and drew strong investor interest,” he said.
Roseview-PMRG Fund I focuses on operating buildings more efficiently, improving the tenant experience, reducing waste and promoting eco-friendly consumption, according to the partners. The fund targets returns of around 15 percent with total investment per asset of $15 million to $65 million in primary and secondary markets.