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Partnership acquires three-building Wateridge campus

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A partnership of Equity Group Investments and San Diego-based Parallel Capital Partners has paid a total of $72.5 million for the three-building Wateridge Plaza office complex in Sorrento Mesa.

The property at 10201, 10221 and 10241 Wateridge Circle – consists of three five- and six-story buildings totaling 278,787 square feet, as well as a parking complex.

The 8-acre project also includes future development potential of approximately 168,000 additional square feet of Class A office space.

The acquiring partnership was EP Wateridge LLC, which took out a $52 million H2 Financial Funding loan to purchase the property.

Parallel Capital, headed by San Diego investor Matt Root, and Sam Zell's Equity Group acquired the property from Wateridge Office Plaza LLC, a partnership controlled by Beacon Capital and C-III Realty.

Adam Edwards, of Eastdil Secured, was the broker for the seller. The buyers represented themselves.

Wateridge was sold to the Beacon Capital and C-III partnership for $50.5 million in 2011.

American Specialty Health and Eddy M’s Bistro are among the tenants of the complex, which currently has an occupancy rate of 72 percent -- or 28 percent vacant.

The building at 10201 Wateridge Circle, was only about 10 percent leased according to a survey by The CoStar Group (Nasdaq: CSGP) within the past month.

Wateridge has had its ups and downs since 1984, having gone through at least one bankruptcy not long after it was constructed.

Recently, the complex -- previously owned by a GE Asset Management entity -- was deeded back to lender Wells Fargo Bank as an agent for Nomura Credit & Capital in 2009.

The property -- which was about 60 percent vacant at the time it went back to its lenders -- was dealt a body blow earlier that year after Cardinal Health (NYSE: CAH) vacated the buildings. Prior to the recession, Cardinal had occupied about 185,000 square feet in the complex.

While American Specialty Health now occupies about 195,000 square feet of the campus, Root said a biotechnology broker/facilitator known as Quinteles Corp. recently moved out of 50,000 square feet.

"The Quinteles space was old space that we plan to revamp," Root said.

Root said the acquisition furthers the firm’s core mission of acquiring irreplaceable, value-added commercial real estate in key Western markets.

“Wateridge Plaza is the ideal address for companies seeking the highest profile location, unparalleled campus amenities, panoramic canyon views and superb freeway access," Root said. "Most importantly it expands our presence in the Sorrento Mesa area, a technology and life science corridor which we believe is an emerging hub of the San Diego office sector. Home to global leaders such as Qualcomm, Carefusion and NuVasive, Sorrento Mesa is rapidly evolving into a world-class life science and high- tech cluster.”

While Parallel hasn't issued a figure, the San Diego firm said it will augment these investments with additional capital improvements to further enhance the institutional quality of the asset.

Parallel has retained architectural firm Gensler and Glanz Signing & Graphics to collaborate and implement additional improvements.

Along with Root, Parallel Capital's principals include Jim Ingebritsen and Jim Reynolds, who each worked The Shidler Group for more than 20 years.

The trio had also teamed up to run the Pacific Office Properties Trust real estate investment trust.

After suffering through this past recession and a de-listing of the REIT's stock on the New York Exchange, the REIT's headquarters that were in San Diego and Honolulu were consolidated at the Honolulu location in 2012. It is still the largest office REIT in Hawaii.

In 2002 a partnership that included these then-Shidler Group principals paid $65 million to acquire the 356,504-square-foot Seaview Corporate Center in Sorrento Mesa.

That property was then sold to a Principal Financial Group-controlled partnership for $92.1 million in 2004.

They re-acquired that property at the credit crisis' height in 2009 from Principal Financial Group for $75 million, and sold it to John Hancock Real Estate in 2011 for $109 million.

Parallel added more than $400 million in commercial real estate to its portfolio last year, with key purchases in Dallas and Orange County.

With this latest acquisition, Parallel now owns or co-owns 13 office, industrial and R&D properties in the San Diego area, with more than 748,853 square feet concentrated in Sorrento Mesa/Sorrento Valley market, including the 114,399-square-foot Sorrento Pines Business Park, the 126,33-square-foot Sorrento Business Complex and the 71,703-square-foot Sorrento Research and Development Park.

The firm also is also in escrow to purchase a 383,000-square-foot office complex in Long Beach, and has other properties from other areas of Southern California and Texas.

Equity Group Investments is part of a Zell network with tens of billions of dollars worth of office and apartment properties.

Zell entities, such as Equity Office Properties, formerly owned the Plaza at La Jolla Village in University City.

Zell's Equity Residential (NYSE: EQR) currently owns the 675-unit Vantage Pointe apartment complex in downtown San Diego.

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