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REITs keep buying everything from hotels to retail, offices to apartments

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Whether they are buying biotechnology properties, retail assets, office properties, apartments or hotels, real estate investment trusts are becoming increasingly important players here in San Diego.

Biotech: According to Biocom, San Diego County has more than 700 biotech, diagnostic and medical device companies employing some 40,000 workers, and they each need a place to carry out their research and support functions.

To this end, life science REITs have purchased and/or built millions of square feet of specialized buildings over the years -- many of them clustered on the Torrey Pines mesa near UC San Diego.

Rancho Bernardo's BioMed Realty Trust (NYSE: BMR) at last report had 153 buildings in 89 properties, comprising more than 12.6 million square feet from San Diego to Cambridge, Mass. About 2 million square feet of that space is in roughly 22 properties in San Diego County. Locally, BioMed's buildings are spread from Carlsbad in the north to Clairemont Mesa in the south.

BioMed paid $24.9 million for a 48,300-square-foot life science building on Torrey Pines mesa earlier this year.

A larger biotech REIT is Alexandria Real Estate Equities (NYSE: ARE), which owns about the same amount of space as BioMed in San Diego County.

Alexandria paid $128 million to acquire the 360,000-square-foot Nobel Research Center in University City last fall and managed to quickly refill the space vacated by Biogen Idec with Illumina (Nasdaq: ILMN) at the beginning of this year. Illumina agreed to pay some $335 million in that 20-year lease transaction.

Office: While San Diego currently doesn't headquarter a large publicly-traded purely standard office REIT, Los Angeles-based Kilroy Realty Corp. (NYSE: KRC) with its roughly 5.5 million-square-feet here, has a seemingly insatiable appetite for San Diego-area properties.

In May, a Kilroy partnership paid $32.94 million for the former Titan Corp. building at 10770 Wateridge Circle in Sorrento Mesa.

Kilroy is also planning a 1.7-million-square-foot development known both as "Main Street" and "Paseo" that would be built on a 23-acre site at the corner of Del Mar Heights Road and El Camino Real in the Carmel Valley.

Main Street/Paseo calls for 500,000 square feet of office, 270,000 square feet of retail, a 130- to 150-room hotel, 608 multifamily units and enough parking for 4,000 vehicles.

Retail: The most prominent retail REIT still headquartered here, Escondido-based Realty Income Corp. (NYSE: O), focuses exclusively on single tenant properties that range from fast food to oil changing locations. The REIT also retains some childcare centers it picked up decades ago.

Realty Income Corp. posted its 492nd monthly dividend payment on July 15. In May, the company announced it had distributed a total of $2 billion in dividends to shareholders since it was founded in 1969.

In mid-June the new monthly dividend amount represented an annualized dividend amount of $1.7385 per share.

The monthly income is supported by the cash flow from more than 2,500 properties owned under long-term lease agreements with regional and national retail chains and other enterprises.

Many, if not most retail REITs, own whole shopping centers. Chicago-based General Growth Properties (NYSE: GGP) which went through a bankruptcy and emerged within the past year, owns the Otay Ranch Town Center -- an 800,000-square-foot mall in Eastern Chula Vista that got hammered when a wave of foreclosures hit the community during the recession. General Growth is banking that a new 12-screen AMC theatre will help bring in more patrons.

The 880,000-square-foot Chula Vista Center, which underwent a significant remodel during the past few years, has reportedly fared better than Otay Ranch during the recession. That mall, which has the only remaining Sears in the South Bay, features Macy's, JC Penney and Ultrastar Cinemas. Kimco Realty Corp. (NYSE: KIM) while based in New York, has literally millions of square feet of shopping centers in San Diego County, from the South Bay to North County and out to East County. It owns so many centers here there are instances when Kimco may be competing with itself.

Rancho Bernardo-based Excel Trust, while newer and smaller than the others, has officers, including CEO Gary Sabin, who have spent many years in the business. Sabin had also been chairman and CEO of Price Legacy Corp. before that firm was sold to units of Kimco Realty and DRA Advisors in August 2004.

Excel at last check owned a 100,511-square-foot Edwards Theaters-anchored center in San Marcos, the 82,157-square-foot Excel Centre office building in Rancho Bernardo and the 325,431-square-foot Gilroy Crossing shopping center in Gilroy among other assets.

Hotels: Hotel REITs, even ones that have had more than their share of troubles, have been big players in some very high-profile properties here. Aliso Viejo-based Sunstone Hotel Investors (NYSE: SHO), which last year walked away from 11 hotels including The W in downtown San Diego, turned around and paid hundreds of millions of dollars for a 75 percent stake in the newly-built Hilton San Diego Bayfront earlier this year. The 3/4 acquisition last spring pegged the value of the hotel at $475 million.

The Hilton wasn't the only acquisition of a hotel interest next to the Convention Center. While Sunstone wanted to acquire the 1,625 Manchester Grand Hyatt -- the largest hotel in the region -- that honor went to Host Hotels & Resorts (NYSE: HST), another REIT that agreed to pay $570 million for the property in February.

Host is a big player here, having ownership stakes in hotels as the San Diego Marriott Marquis & Marina, the Sheraton San Diego Hotel & Marina (on Harbor Island), the Coronado Island Marriott Resort & Spa, and the San Diego Marriott in Mission Valley according to its website.

LaSalle Hotel Properties (NYSE: LHO) is another REIT that has ownership interests in significant properties here including the 462-room Paradise Point Resort & Spa and the 357-room Hilton San Diego Resort on Mission Bay.

Apartments: The largest deal from an apartment REIT for a San Diego property within the past year was Sam Zell's Equity Residential's $200 million purchase last fall of the 675-unit Vantage Pointe development in downtown San Diego. While this property had languished as a condominium project, reports are that the units are leasing well as rentals. Equity Residential is well acquainted with San Diego, as it either has owned or currently owns more than 5,000 units here.

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