Hines Sells San Diego Office Campus for $525M
- Jun 24, 2019
American Assets Trust Inc. has acquired La Jolla Commons, a 724,000-square-foot Class A office complex in the University Town Center submarket of San Diego, the self-administered REIT announced. The asset consists of two LEED Platinum office towers, an entitled development parcel and two parking structures.
AAT reportedly paid the $525 million purchase price (less a seller credit of about $11.5 million) with a combination of cash on hand and funds drawn against the company’s existing credit facility. The seller was Hines Interests, according to information provided to Commercial Property Executive by Yardi Matrix.
One tower, at 4707 Executive Drive, totals about 421,000 square feet over 13 stories and was completed in 2014. The building is fully leased to LPL Financial. The second tower is at 4747 Executive Drive and totals about 303,000 square feet, also across 13 stories. Completed in 2008, the property is currently about 72 percent leased; major tenants include U.S. Bank National Association, Paul Hastings LLP and Finch, Thornton & Baird LLP.
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La Jolla Commons is within walking distance of a variety of high-end dining venues and upscale retailers. The campus also provides easy access to both San Diego’s major freeways and the Mid-Coast Trolley line extension of the Blue Line, which is scheduled to open in 2021, according to the San Diego Metropolitan Transit System. AAT did not respond to Commercial Property Executive’s request for additional information.
Steady demand into the future
The Central County submarket’s average vacancy, 13.8 percent on an inventory of 51.3 million square feet, closely reflects the San Diego market as a whole, according to a first-quarter report from Cushman & Wakefield.
The metro area’s overall vacancy has crept up by 110 basis points since a year prior. Although employment numbers in San Diego are strong, net absorption has fallen off since 2017. Still, the report notes that the countywide total of active tenant requirements (of all sizes) is “robust” at 3 million square feet over the next 24 months.
One unusual factor has been taking office space off the market in Central County, Cushman & Wakefield reported: “Developers have been eager to purchase and redevelop obsolete office or industrial projects in the Central County submarkets to accommodate life science and biotech companies as the existing available supply has significantly been reduced, while tenant demand from this industry sector remains at all-time highs.”
In February, a joint venture of IDS Real Estate Group and Lionstone Investments bought a Class A office portfolio in San Diego’s Liberty Station development from McMillin Cos. for $76.8 million. HFF represented the seller and placed the acquisition financing.