SAN FRANCISCO-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that New York City-based Madison International Realty has acquired a 26% ownership interest in two California properties held by a closed-end fund sponsored by Deutsche Asset & Wealth Management, a subsidiary of Deutsche Bank AG. The portfolio consists of two properties: the 111,775-square-foot Saks Fifth Avenue Store in San Francisco and a 315,450-square-foot research and development center in San Jose.
Although the purchase price was not disclosed, our sources tell us that it was around $35 million. Madison International wouldn’t confirm that number.
“We were able to provide an exit strategy for existing investors while acquiring an interest in two high-quality assets located in major growth areas leased to long-term tenants,” says Ronald M. Dickerman, president of Madison International Realty. “This transaction is an excellent fit with Madison’s specialized investment strategy.”
The Saks property is a trophy quality free-standing department store, leased long-term to Saks Fifth Avenue and located in the heart of San Francisco at 384 Post Street on Union Square. The building was constructed in 1982 and substantially renovated in 2001.
The research and development center is leased long-term to Celanese Americas Corp. and located at 3403 Yerba Buena Rd. in San Jose. The four-story center is situated on a 36-acre site with 600 parking spaces.
Madison International clearly isn’t only interested in Northern California product. The firm specializes in acquiring partial ownership and joint venture interests in class A properties and portfolios in the US, London and Europe. As GlobeSt.com recently reported, the firm also likes Downtown L.A. The firm’s recent $295 million 49% ownership interest acquisition of One California Plaza demonstrates the company’s continued interest in the Downtown Los Angeles market, Madison International Realty president Ronald M. Dickerman previously told GlobeSt.com.
As GlobeSt.com also recently reported, Dickerman says he’ll transact anywhere from a 5% stake up to 49%, most typically in the upper reaches of that range, only occasionally going to a larger bite. And he’s applying the strategy not only to US-based opportunities, but is also courting European activity as well. “You have broken, tired capital structures,” Dickerman previously said. “Even though cap rates have compressed and values have come back, what’s fascinating is that rental rates haven’t recovered to their high watermarks in most major cities. In New York, rental rates were $85 to $90 a foot. Now, they’re $50, $60, $70. Only in prime buildings have they gone back to well over $100. There’s still a lot of residual effect from the credit crisis that hasn’t been fully wound through the system as it relates to those capital structures and the disposition of investors.” The result is a wait-and-see, the proverbial can being kicked down the road, and Madison’s strategy is to capitalize on breaking the ownership logjam.
Such as it did recently with its purchase of a 25% stake at 655 Madison Ave., home to Lowes Corp. and Donna Karan’s New York flagship. “We bought it from a New York-based foundation that had come to the end of its charitable giving life,” explains Dickerman. The foundation had to issue the remainder of its principal to its beneficiaries, and much of that principal was tied up in 655.