The former General Dynamics building in a Kearny Mesa development known as San Diego Spectrum has been sold for $52.5 million, as multifamily development continues at other sites on the 230 acres.
The buyer of the two-story, 166,900-square-foot building located at 9305 Lightwave Ave., is a unit of Menlo Park-based GI Partners, a private equity firm that specializes in acquiring these types of properties.
GI Partners is active in a number of sectors, including asset-backed Internet technology services, specialty healthcare and education, leisure, commercial real estate, hospitality, retail and financial services.
Since its inception in 2001, GI has managed $8.4 billion of equity capital through its commingled fund products and separate accounts.
The seller is a partnership of LBA Realty of Irvine, a multi-billion-dollar investment and management firm with 2.5 million square feet of primarily office and industrial properties in San Diego County.
LBA’s $31.6 million acquisition of the 187,763-square-foot Kearny Mesa Industrial Park in 2007 is among that firm's relatively recent transactions here.
There was no buyer broker on the Lightwave transaction. Nicholas Psyllos and Ryan Gallagher, both of HFF (NYSE: HFF); and Kevin Shannon, Scott Schumacher, Ken White, Brad Black and Rob Merkin, of CBRE (NYSE: CBRE), represented the seller.
The building occupancy is split between two tenants; data center operator American Internet Services on the ground floor, and San Diego Gas & Electric on the second.
Psyllos said the building, originally built for General Dynamics (NYSE: GD) as a computer center in 1985, is unique in a variety of ways.
“Data centers need three things: power, cooling and security. This building has all these in abundance,” Psyllos said. “This building also has nine separate fiber optic providers.
"Data centers are one of the most popular 'food groups,' because there aren’t that many of them,” Shannon added.
The data center portion of the building comes at a relative premium.
Psyllos said the rent for American Internet is about $2.30-per-square-foot (through March 2027), versus about $1.60-per-square-foot for SDG&E (through December 2017).
Psyllos said the 10-acre lot is also entitled for an additional 75,000-square-foot office or office/industrial building.
In addition, Psyllos said the 556 spaces of existing parking could be expanded to 1,025 or 6.1-per-thousand.
Alexander Fraser, GI Partners managing director, said the Lightwave building is just one of what he hopes will be many acquisitions of high technology and life science properties across the country.
“We are buying core properties that are well located and leased, and San Diego is a market of interest for us,” Fraser said, adding he has acquired similarly-sized data centers in Northern California and Virginia, with others in escrow in the Bay Area and New York City.
The San Diego Spectrum property continues to see new construction activity, although one project -- office building Sunroad Centrum II -- is in an indefinite holding pattern.
For a time it appeared that Bridgepoint Education (NYSE:BPI), which occupies about 200,000 square feet in Sunroad Centrum I, would fill the 193,000-square-foot Sunroad Centrum II property as well.
Instead, the for-profit education provider terminated its lease for the space in February.
“I don’t think we will see that (Centrum II) built for several years,” said Craig Bachmann, Sunroad Enterprises director of construction. “We’re not interested in doing spec at this time. It would be too risky.”
Bachmann said Sunroad might be amenable if the right build-to-suit opportunity came around.
To the north and east of where Sunroad Centrum II would be constructed, Sunroad in conjunction with Wermers Properties has just broken ground on Ariva, a 253-unit luxury apartment complex in two buildings on either side of Centrum Park at San Diego Spectrum Boulevard and Ariva Way. One- and two bedroom units are planned.
“We’re excited, this is a new type of product (apartments) for us,” Bachmann said.
A bit further east, Sunroad also owns a parcel where as many as 500 additional multifamily units could be constructed.
Also east of the Sunroad Centrum office properties, William Lyon Homes is planning 80 residential condominiums called Atrium at the Spectrum.
The two- and three-bedroom units will range from 1,166 to 2,291 square feet.
Completed in October, the 379-unit Domain by Alta development by Wood Partners is about 36 percent leased, according to Cory Valenti, the leasing professional on the property.
The studio- to two-bedroom-plus-loft units from 600 to 1,309 square feet, with rents ranging from $1,540 to $2,700 per month.
Along with some other apartment properties at the Spectrum, the 448-unit Avion at Spectrum property, built in 2002, has time to fill up, with 88.8 percent of its units occupied and 91.3 percent leased.
Masterplanned by Lennar Partners after a downsized General Dynamics departed in the 1980s, the roughly 230-acre property was master planned with a mix of uses, including office buildings, a couple thousand apartments, hotels and a small amount of retail and park space.
Bachmann said Lennar, which paid $79.5 million for the property in July 1998, has essentially sold out its remaining interests in the Spectrum project.
Others making their homes at the Spectrum range include the San Diego County Water Authority, Northrop Grumman (NYSE: NOC), a test kitchen and offices for Jack-in-the-Box (NYSE: JBX), California Coast Credit Union and the YMCA.
A Courtyard by Marriott is also on the former General Dynamics property.