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Year's biggest deal in Chula Vista tops troubled office market

In what has been billed as the largest office property sale in Chula Vista so far this year, an owner/user has purchased an 87,000-square-foot office building in the EastLake Business Center.

But not every office landlord in Chula Vista has been so fortunate.

The building at 900 Hitachi Way was purchased for $11.85 million by CHG Foundation or Community Health Group, a nonprofit health plan focused on San Diego County.

The seller, Chula Vista Investment Group LLC, is a partnership managed on behalf of the Alaska Permanent Pension Fund, and was represented by Mickey Morera and Chris Holder, of Cushman & Wakefield.

The buyer -- which purchased the building to be close to its current headquarters on a neighboring parcel -- was represented by Brandon Keith and Tracy Clark, of Voit Real Estate Services.

“Our client was seeking a larger headquarters facility in proximity to its current headquarters in Chula Vista to expand its local operations,” Keith explained.

“This transaction is an excellent example of the ongoing recovery in the San Diego market," Keith said. "Companies are gaining the confidence to buy again, armed with the knowledge that real estate prices have likely hit bottom.”

CHG Foundation will occupy 67,000 square feet of the two-story office/flex building for its operations.

The remaining 20,000 square feet will be occupied by Hitachi America Ltd., a supplier of household electronics, on a lease completed as part of the sale. Hitachi had previously occupied the entire building.

The price of the Hitachi Way property has been discounted during the past five years.

In 2007, Chula Vista Investment Group acquired the property for about $16.5 million.

In 2007, Hitachi became the third high tech electronics firm to locate in the 203-acre EastLake Business Center.

The first two were DNP Electronics and the Leviton electronics firm’s regional headquarters.

The building was constructed by McMahon Development Group of San Diego between summer 2002 and mid-2003.

Office buildings in Chula Vista have had varying degrees of success over the years, and Gateway Chula Vista developer Jim Pieri Sr.’s experience is a case in point.

Pieri, who heads the Mountain West Real Estate development firm, found himself in default on a $33.4 million Bank of America (NYSE: BAC) loan secured by the 129,315-square-foot Gateway Chula Vista II property at 333 H St. before he lost the it to foreclosure a year ago.

The Gateway Chula Vista II property is still 31.4 percent vacant according to The CoStar Group (Nasdaq: CSGP).

The average time on the market for a space in that building is 33 months.

Bloomberg News reported Pieri’s 100,334-square-foot Gateway Chula Vista I property at 303 H St. was also experiencing some distress, before Mountain West landed a 40,000-square-foot lease with the county Department of Health & Human Services earlier this year -- bringing that building to 94.7 percent full.

Other Chula Vista office properties had their troubles within the past couple of years.

Most notable was the 135,183-square-foot Plaza at EastLake building at 2300 Boswell St., which was foreclosed upon in early 2011. That property still is about 85 percent vacant according to CoStar.

For the third quarter, CoStar reported Chula Vista had 556,329 square feet of available space out of a 3.44 million-square-foot office market for a vacancy rate of 16.2 percent.

In neighboring National City, the 198,198-square-foot South Bay Corporate Center at 401 Mile of Cars Way -- acquired by Walton Street Capital and Greenlaw Partners for $16.6 million in May -- is empty.

General Dynamics NASSCO says it is looking at occupying the space, along with considering other options.

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