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Notable commercial sales

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San Diego County has had some significant commercial property sales during the past few months, but just how active they will be in the future will depend on the asset class.

Office:
Waiting for Dutch firm Wereldhave to sell the 376,703-square-foot First Allied Plaza (also known as Advanced Equities Plaza) building at 655 West Broadway was like waiting for the other shoe to drop. About a year ago, the company announced it would be divesting all of its U.S. holdings to help right its balance sheet, and didn’t seem to mind losing money in the process.

DiamondView Tower, which looks into Petco Park, was the first to be sold. A joint venture of Cruzan|Monroe and the Cigna Corp. (NYSE: CI) acquired the 305,000-square-foot asset for $121 million last October -- about $40 million less than Wereldhave paid for the building when it was previously acquired in September 2008.

Then a unit of private equity firm Lone Star Funds paid $140.88 million for First Allied Plaza -- or a more than $70 million discount from the roughly $212 million figure Wereldhave had paid for the West Broadway building in 2007.

Lynn LaChapelle, Jones Lang LaSalle (NYSE: JLL) Capital Markets managing director, said while it first appeared that Lone Star might re-sell First Allied Plaza soon, the private equity firm now says it will hold onto the property.

Other notable office property sales within the past six months included the $49 million sale of 359,218-square-foot 600 B St. to Lincoln Property Co. and Angelo Gordon & Co. in December, and the $135 million sale 553,715-square-foot Columbia Center property at 401 West A St. to the Emmes Group of Cos. last November.

LaChapelle, who tracked $1.2 billion in local office property sales last year, said this year should be comparable -- “perhaps a little less.”

“Though sellers and buyers are going to keep trying to put transactions together, the pricing doesn’t seem to be meeting expectations,” LaChapelle said.

LaChapelle said rents are still running 10 to 15 below their peaks in 2007 in many instances.

Industrial:
Otay Mesa, which is being planned for R. Michael Murphy’s eventual 3 million-plus-square-foot Brown Field Technology Park, a second Otay Mesa Border Crossing and a cross-border airline terminal, is where much of the action is on the industrial front.

While Murphy, who pioneered modern-day development in Otay Mesa in the 1980s, ponders his next move, other long-time players have snatched up properties.

Following multiple acquisitions last year, El Cajon-based Hamann Cos. on May 1 paid $5.41 million to acquire a 103,904-square-foot industrial warehouse building at 2350 Siempre Viva Court formerly occupied by Martin Furniture.

“This is a great building. It has a 32-foot clear height,” said Rob Hixson, a CBRE (NYSE: CBG) senior vice president and Otay Mesa Community Planning Group chairman.

As Wereldhave moved to divest itself of U.S. assets so too did Dexus, which will be re-deploying its assets in its home country of Australia. Heitman LLC and the National Pension Service of Korea acquired two Otay Mesa assets on Airway Road assets as part of a portfolio.

These included 7510 Airway Rd., which has 44,840 square feet; and 7520 Airway Road, which has 78,260 square feet, were purchased for $3.24 million and $5.67 million respectively last February.

Retail:
On the macro scale, Escondido-based Realty Income Corp.’s (NYSE: O) $3.1 billion acquisition of American Realty Capital Trust -- completed last January -- was a major story in the REIT world. That one deal added 515 mostly retail properties across the country to RIC.

A major retail transaction that happened within the past six months was that of the 148,638-square-foot Uptown District in Hillcrest.

Regency Centers Corp. (NYSE: REG) paid $81.1 million for Uptown District as part of a four-asset, $188.5 million transaction last December.

Uptown District, anchored by a Ralphs and a Trader Joe’s, also includes Panera Bread, Wells Fargo Bank, Starbucks and AT&T, among many other tenants.

Built by the OliverMcMillan development firm in 1989, the center was constructed on the site of a former Sears store.

In late November, Kimco Realty Corp. (NYSE: KIM) paid $35.6 million for the 108,741-square-foot City Heights Retail Village property conceived, as part of a larger masterplan by Price Club founder Sol Price and former San Diego City Councilman William Jones in the 1990s.

Kimco also paid $53.8 million in January to acquire the remaining stake in the 311,000-square-foot Santee Trolley Square development in Santee.

Bill Thaxton, a Flocke & Avoyer senior vice president, said the 260,000-square-foot San Ysidro Village development (across from the Las Americas outlet center) is close to changing hands. The center owned by Westwood Financial, last sold for $42.5 million in November 2005.

Thaxton said after years of sitting on the sidelines, investors in retail properties are making their moves.

“There’s a pent-up demand for quality real estate,” Thaxton said.

Hotels:
Alan Reay, Atlas Hospitality Group president, said after the record sales year of 2011, he expects the hotel sales in California in 2013 to be on par with last year.

“We are going to see more activity with the sale of properties for new development,” Reay said. “We are also going to see more tear-downs. For example, a Ramada on Hotel Circle (in Mission Valley) is being demolished for a Hampton Inn.”

Also in Mission Valley, in March, the Hilton sold for $45 million at 901 Camino del Rio South to Kalpana LLC of Newport Beach.

A much larger sale was that of the 336-room Embassy Suites San Diego Bay at Harbor Drive and Pacific Highway that was acquired by a unit of Pebblebrook Hotel Trust (NYSE: PEB) for $122.5 million in January.

The Andaz, a Hyatt-operated 159-room hotel at 600 F in the Gaslamp Quarter, sold for $53 million to a unit of Oak Brook Illinois-based Inland American Lodging Associates.

The Andaz is the third incarnation of a hotel on this property. It was previously known as The Ivy Hotel and was the lower-income Maryland Hotel before millions of dollars turned it into an upscale venue.

Sometimes an acquisition is not of the underlying property, but a leasehold interest. Such was the case with the January acquisition of the leasehold interest of the 129-room Kona Kai Resort on Shelter Island for $12.5 million to a unit of Seattle-based Nobel House & Resorts.

Noble House plans to spend $5.3 million on an extensive renovation before spending another $9.1 million to add 45 new rooms.

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