Pacific Office Trust Buys 4 San Diego Buildings

Pacific Office Properties Trust Inc. has acquired four San Diego-area office buildings totaling 129,000 square feet. Pacific Office acquired the portfolio in partnership with an institutional co-investor and will own a 32 percent managing ownership interest in the properties. The four new properties include twin office buildings in the Scripps Ranch Business Park in San Diego, and the Palomar Heights Corporate Center and an adjacent office building in Carlsbad, Calif. The transaction completes Pacific Office’s acquisition of a seven-building San Diego portfolio, three buildings of which were acquired last month. Pacific Office is a new REIT, formed by Honolulu financier Jay Shidler and Arizona Land Income Corp., through the contribution of the Shidler Group’s western US office portfolio to Phoenix-based Arizona Land. As part of its formation transactions, Pacific Office was granted the option to acquire certain properties that the Shidler Group acquired (or had under contract) beforehand. Last month, as reported by CPN, Pacific Office acquired the 152,000-square-foot Kalakaua Business Center in Hawaii by exercising one of these options, and has now done so to acquire the San Diego portfolio. In both cases, the acquisition price for each option property is equal to the property’s cost, or proposed cost, to the Shidler Group. Pacific Office hasn’t disclosed the acquisition price for the San Diego properties, but according to Grubb & Ellis, office properties in greater San Diego sold for an average of about $240 per square in the first quarter of 2008. The 1Q08 figure is considerably down from the 2007 average, when San Diego office buildings sold for more than $350 per square foot. According to the REIT, the acquisition in San Diego represents a value-added play. As with its other recent acquisitions, it plans to make various improvements to the properties and reposition them for a lease-up. Such a task might be more difficult now than previously, with office vacancies in San Diego County increasing from 11.5 percent at the end of 2007 to 12.8 percent at the end of 1Q08, according to Grubb & Ellis.Blog Story and Comments