One of downtown San Diego's older office towers, the 232,098-square-foot Union Bank Building at 530 B St.in the financial district, has been sold for $29 million to Los Angeles-based Kearny Real Estate Co.
The building was acquired from Union Bank N.A., which will continue to occupy what The CoStar Group (Nasdaq: CSGP) said is 87,754 square feet under a long-term lease.
According to recorded documents, The 10-year lease expires in December 2025 and included two additional five-year renewals.
In addition to Union Bank and the San Diego office of Kearny, other significant tenants include the San Diego Regional Economic Development Corp. the law firm of Peterson Price, Messner Smith, Peterson & Associates and Standing, Chapter 13 Trustee.
Kearny took out a $26.67 million shared appreciation loan with Wells Fargo Bank to finance the acquisition.
Under such a mortgage, the lender is entitled to a specified share of the building's appreciation.
The buyer, which has offices in the building, said it plans to spend about $15 million -- or more than half what it paid for it -- to upgrade the property that with a 43 percent vacancy rate, hasn't found tenants easily.
Bragg said while it didn't exactly help when Procopio Cory Hargreaves & Savitch vacated a couple of the building's upper floors within the past two years, that it also opened up opportunities for his firm as well as other tenants.
"My job is going to be to fill the thing," said John Bragg, a Kearny partner who heads the San Diego office.
Upgrades include a significant overhaul of the building’s core plumbing, new restrooms, tenant improvements, and an indoor/outdoor treatment of an under-utilized 12,000 square-foot patio.
“This patio is one of the reasons we bought this iconic building," Bragg said. "It gives us the opportunity to create a wonderful indoor/outdoor experience for our tenants. When completed in spring 2014, there will be nothing else like it for tenants in downtown San Diego. It's going to be real pleasant out there."
Bragg added he would like to fill a 5,000-square-foot space with a new restaurant.
The building is characterized by its floor-to-ceiling windows, and every floor offers 360-degree views of the San Diego Bay, Pacific Ocean and Balboa Park.
“Businesses occupying 10,000 square feet or less make up approximately 85 percent of the office space in downtown San Diego,” Bragg added. “With 9,250 square-foot floor plates, the building provides unique full-floor opportunities for the mid-size tenants that dominate the downtown market.”
Dating back to 1966, the building underwent a substantial renovation in 1992.
Bragg noted that while Union Bank will retain the signage, the building is being rebranded as "530 B Street."
Bragg said he had been interested in acquiring the building for years, and jumped at the chance when he found out from CBRE (NYSE: CBG) last year that the property was up for sale.
"We wanted to get a little more space and we thought what better way than to buy the building," Bragg said.
Louay Alsadek and Evan August, of CBRE, represented Union Bank in the transaction; Ryan Grant, Andrew Taylor and Jim Rinehart, of CBRE, have been retained as leasing agents. Kearny represented itself in the sales transaction.
The downtown highrise had been the tallest office building in San Diego for many years, before being surpassed by the likes of One America Plaza, Symphony Towers and Emerald Plaza.
Kearny Real Estate is a partnership of real estate professionals active in acquisition, entitlement and land development, repositioning, distressed debt workouts, leasing, management and disposition of commercial real estate projects with an aggregate value of more than $4.4 billion.
Kearny has been involved in buying and selling both office and industrial real estate for many years, having owned and/or developed properties from the border to Sorrento Mesa.
Kearny is developing the 311 Otay Crossings development near future state Route 11 and the planned second border crossing on Otay Mesa.
The developer also owned such properties as research development buildings in Carmel Mountain Ranch, industrial and R&D buildings in Sorrento Mesa, and industrial properties in Temecula.
While it is the first major downtown San Diego highrise transaction of 2014, the sale is just the latest in a series of transactions over the past couple of years.
Recent sales included the Bank of America Tower at 501 B St. for $73 million late last year, Columbia Center for $135 million in November last year, and the 600 B St. Building for $49 million in late 2012.