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Ownership change of nearly all downtown high-rise office space finished in 2004

In 2004, the two-year turnover of much of downtown San Diego's high-rise office space was completed, condominium conversions multiplied, and shopping centers commanded big prices when available.

Wells Fargo Plaza, top, and Emerald Plaza are just two San Diego County properties that have changed hands in 2004.

Nearly every major office building in downtown San Diego has sold within the past two years beginning with the 570,000-square-foot One America Plaza in December 2002 for $166.2 million.

Last month, the 23-story, 472,000-square-foot Wells Fargo Plaza at 401 B St. was sold for $148.27 million to The Irvine Co., which also bought Symphony Towers for $134.25 million in March 2003.

In late spring, in a deal that may have been the largest single office building transaction in the history of downtown San Diego, three high-rises totaling about 1.16 million square feet were sold for $274.5 million.

The buildings were the 30-story, 356,901-square-foot Emerald Plaza at 400 W. Broadway; the 24-story, 336,049-square-foot Comerica Bank building at 600 B St.; and the 22-story, 427,988-square-foot Golden Eagle Plaza at 525 B St. The seller was Southwest Value Partners. Each of these buildings was more than 90 percent leased.

Although not a high-rise, the eight-level, 91,163-square-foot Fourth Avenue Corporate Center was sold this fall for $15.15 million.

Not all of the large office transactions were in downtown San Diego.

In November the 15-story, 227,570-square-foot La Jolla Executive Tower at 4225 Executive Square in University City was sold for $70.5 million to a real estate investment trust controlled by billionaire investor Sam Zell.

In July, The Seaview Corporate Center, a 353,067-square-foot, four-building office and biotechnology complex in Sorrento Mesa at 10180-10196 Telesis Court, was sold for $92.25 million.

With rents still climbing and vacancies generally comfortably under the 5 percent level, well-located apartment projects continue to be the darling of investors.

An enormous two-phase transaction that was billed as one of the largest in the state in the late 2003 through early 2004 was the sale of The Promenade Rio Vista, a two-phase, 970-unit apartment complex on Station Village Way in Mission Valley that sold for $203 million.

Much of the larger scale apartment activity involved apartments that were about to be converted.

Most recently, the 514-unit La Cima apartment complex at 7405-7597 Charmant Drive in North University City was purchased for $131.25 million with the intent to convert.

Another planned conversion involves the 685-unit Nobel Court Apartments complex in the UTC area at 8895 Caminito Plaza Centro that was sold for $149 million.

Jeff Rogoway of Prime Property, who handled both the La Cima and the Nobel Court transactions, believes the condominium conversion craze is going to last a few more years.

Rogoway also said by allowing these units to be converted, the city stands to gain significantly from increased tax revenues.

Also late this year, the 368-unit Venetian complex at 3945 Nobel Drive in University City was sold for $96 million and was already in the process of being converted into a condominium.

Watt Commercial Properties said they had originally intended the 382-unit Acqua Vista project in Little Italy as an apartment complex, but changed to condominiums before selling the property for $106 million to K. Hovananian Cos.

Alan Nevin, MarketPointe Realty Advisors' economic research director, said while it seems there has been a flurry of conversions, the total number over the past five years only represents about 1.5 percent of the rental stock.

"It's fairly insignificant. And if you look at the statistics you'll see that 90 percent of the buyers are former renters," Nevin said.

Nevin predicted that next year there will be a dramatic change in the pricing levels for the newer units. Up until now, with many of the properties being converted consisting of older units, the prices have tended to be less than $300,000. He expects that to change.

"Instead of the low $200,000s, you are going to see prices in the $400,000s to $500,000s. This is an effort to get the first-time young professional buyer," Nevin said.

Some very expensive land was purchased from downtown San Diego to Oceanside.

In Oceanside a CityMark Development entity just paid $14 million to acquire five vacant blocks totaling 5.12 acres in the midst of Oceanside's downtown area intended to become a significant piece of a mixed-use village.

In downtown San Diego, much of the land that has been bought is being planned for high-rise residential.

In October a 50,000-square-foot portion of a 60,000-square-foot block bounded by A and B streets and Eighth and Ninth avenues was sold for $18 million with a high-rise residential tower planned.

Another 50,000-square-foot section of a 60,000-square-foot downtown San Diego block bounded by West Beech and Ash streets and Pacific Highway and California Street was sold for $11,885,000 to a partnership of Intergulf Development and Lennar Communities. The new ownership plans to refurbish the historic structure and build a 180-unit luxury condominium.

Another important land sale happened in Carlsbad with the sale of a 132-acre portion of the Bressi Ranch for $28,772,000. The land will be used for office and light industrial development.

On the industrial side, the 210,688-square-foot research and development/office building at 2051 Palomar Airport Road in Carlsbad was sold for $23.25 million last February.

Most of the retail property sales of 2004 were of a smaller nature, but there were some notable exceptions.

In October Felicita Town Centre, a 126,502-square-foot retail center at 1805-1895 Centre City Parkway in Escondido was sold for $26.5 million. The center is anchored by Major Market, Trader Joe's, Rite Aid, Blockbuster and Escondido Golf.

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