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Vacant commercial properties on the rise; prices way down

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The number of bank-owned and short sale commercial properties are increasing by all accounts, and even non-bank sales are seeing greatly diminished prices.

A Commercial Property Marketing Expo co-sponsored by the San Diego Commercial Realtors Association (CRASD) and the Certified Commercial Investment Member (CCIM) organization at University Towne Centre Tuesday, was about evenly divided between troubled and/or bank owned assets and healthy properties.

The session presented about 30 properties, most of which were in San Diego County. Whether the assets were bank-owned, short sales or standard transactions, the properties were discounted by as much as half of what they might have been sold for three years ago.

A banked-owned 10,000-square-foot corner lot with a 2,000-square-foot commercial building that could be scraped at 1860 Sixth Ave. in downtown San Diego, sold for $1.8 million in 2006, and is being marketed for $980,000.

The listing brokers are Steve Malley and Evan McDonald of Lee & Associates. Malley noted the property is zoned for up to 13 multifamily units, office or medical uses.

Barbara Kreis, a Sperry Van Ness broker has a non-bank-owned 25,400-square-foot property at 220 W. Crest St. in Escondido that was the headquarters building of Realty Income Corp. (NYSE: O) before it moved into a larger building nearby about a year ago. The Escondido property is priced at $4,826,000.

"That would have been worth over $6 million," (three years ago) Kreis said. "This price is well below replacement cost."

One of the receivership sales includes a 31-unit condominium complex at 247 N. First St. in El Cajon that is completing a near-complete renovation. Jim Taylor and Krista Berger of Sperry Van Ness are the listing brokers.

"We don't have a set price on this. We'll take the best price we can get," Taylor said

A non-bank-owned property Kreis says is priced well below the seller's cost is a 10,204-square-foot professional office building being marketed for $1.75 million at 641 E. Pennsylvania Ave. in Escondido.

"More than twice the asking price was paid for this property a few years ago," Kreis said. "This has an exceptional location adjacent to Palomar Hospital."

Some of the assets on the list are more than 50 years old. In fact, a bank-owned, 3,750-square-foot commercial building at 2232 El Cajon Blvd. in the North Park area, was listed as having been constructed in 1923.

Malley and Mary Kay Bier, also of Lee & Associates are handling 2232 El Cajon Blvd, which is priced at $680,000.

Some bank-owned office and flex condominiums marketed during the session are within a non-bank-owned complex known as the Venture Commerce Center -- a 13-building, 193,216-square-foot property in the EastLake master plan in Chula Vista. Four of the office condominiums that are being marketed are bank owned.

Malley, who oversees these assets as part of a Lehman Brothers-owned portfolio, said a 3,292-square-foot space in Venture that might have sold for $975,000 three years ago, is being sold for $576,000 today. A 3,004-square-foot space that had actually sold for $738,000 in May of 2006, is being marketed for $526,000; a 2,004-square-foot space that might have sold for $700,000, is being marketed for $400,000; and a 1,137-square-foot space in Venture that Malley said might have gone for $400,000 three years ago, is now being marketed for $227,000.

Malley said many of the units in the Venture Commerce Center (other Venture Commerce Centers are on Otay Mesa and Sorrento Mesa) were bought by speculators -- some of whom were caught unable to make payments when the values went upside down. This could be a boon for those purchasing now, however.

"Someone who is business savvy is going to make a substantial amount of money on this," said Malley. "Plus, there is still SBA financing out there, so this is an excellent opportunity."

A few of the non-bank-owned properties being marketed were from out of state including a 38-space RV park at the Silverton terminus of the Durango to Silverton Narrow Gauge Railroad in Colorado. Taylor and Krista Berger of Sperry Van Ness are marketing the property for $750,000. It had been appraised at $950,000 within the past two years.

Closer to home in the Inland Empire, Athena Harman of Harman Realtors is marketing the 77,000-square-foot Temecula Creek Shopping Center, the 39,000-square-foot Murrieta Pointe Shopping Center, and a Ruby Tuesday and Panera restaurants in Temecula.

The Temecula Creek Center sold for just $11.6 million in 2006, but that was before the center was expanded from about 35,000 square feet to its existing size.

Harman has two sets of prices for the Temecula and Murrieta assets. If purchased together, the asking price is $37 million. If bought separately, the Temecula Creek Center is being sold for $20 million, Murrieta Pointe is being marketed for $15 million, and there is a combined $5 million asking price for the Ruby Tuesday and Panera restaurants.

Not all properties have lost value over the past three years. Another asset being marketed by Kreis is a 17,400-square-foot, non-bank-owned office building at 630 L St. in Chula Vista, occupied by an Office Depot being listed for $3.48 million. The property sold to Hye Kyong Khang and Nancy Choi for $3.4 million in 2005.

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