Bids Galore, but CBRE Realty Trust Wins 134,000-SF Time Warner Cable Regional HQ in Suburban San Diego
- May 14, 2010
May 14, 2010
By Barbra Murray, Contributing Editor
Investors came out for the 134,000-square-foot office and R&D building at 10450 Pacific Center Court in Sorrento Mesa, Calif., but it was CB Richard Ellis Realty Trust that emerged victorious. The Princeton, N.J.-based REIT has acquired the fully leased suburban San Diego property, home to Time Warner Cable’s regional corporate headquarters, in an all-cash deal–no debt attached.
Real estate services firm CB Richard Ellis, a sister company of CBRE Realty Investors, shopped 10450 Pacific Center around on behalf of the seller and fielded a hoard of inquiries from eager investors. “The property was broadly marketed and it was a competitive bid situation,” Phil Kianka, executive vice president and COO of CBRE Realty Trust, told CPE. “There is a little bit more of the cash that has been on the sidelines that’s beginning to enter the market.”
Occupying a nine-acre parcel near Interstate 5, the two-story building at 10450 Pacific Center was developed approximately two decades ago. Time Warner Cable is occupying the space under a triple net lease agreement scheduled to expire in 2018, but that may not be the end of the road for the company, as it has the freedom to exercise four five-year renewal options. The prime San Diego-area location and creditworthy tenancy were not the only factors that lured CBRE Realty Trust and other bidders to the property. The site has entitlements for an additional 86,000 square feet of office space and a structured parking facility, which “was certainly one of the items that were attractive to us,” Kianka said.
While 10450 Pacific Center offers development opportunities, the metropolitan San Diego office market–like most other office markets in the country at this time–is not exactly in need of extra office space. The average total vacancy rate is 24.3 percent in Metropolitan San Diego, and 22.2 percent in Sorrento Mesa, according to a first quarter report by CBRE. Market demand or no, CBRE Realty Trust is not interested in adding to the pool of available office space.
“As a long-term holder, we would like to work with the current tenant to accommodate their future needs,” Kianka said. “It’s something we would pursue if Time Warner Cable came to us and said they had a need. It’s a critical-use facility and we would like to be mindful of the reason the tenant is utilizing the property and its current function; they ought to be the primary resource for the property.”
CBRE Realty Trust is remaining mum on the financial specifics and other such details regarding the transaction. However, 10450 Pacific Center last changed hands in 2005 when Irvine, Calif.-headquartered real estate investment and management concern LBA Realty Inc. acquired the property for nearly $17.9 million. For the new owner’s purposes, according to Kianka, 10450 Pacific Center “fits nicely with the core function of our fund.”