SAN DIEGO—It's difficult to put together a homogenous group of properties in a market with such distinctly different submarkets and product types, which makes the Casey Brown Co.'s recent purchase so unique, principal John Kenney tells GlobeSt.com. The firm acquired a three-property office portfolio from Peregrine Realty Properties for $76.95 million, a rare transaction for this market.

The office portfolio totals 328,943 square feet with properties located in the Kearny Mesa, Mission Valley and Old Town submarkets of Central San Diego. Louay Alsadek and Hunter Rowe of CBRE represented the seller on Chesapeake Park Plaza, a 92,321-square-foot, glass-lined building at 9665 Chesapeake Dr. in the Kearny Mesa submarket, leased primarily to engineering, consulting, law, technology and real estate firms; and Valley Corporate Center, a 12-story, 176,132-square-foot office tower located at 591 Camino De La Reina in Mission Valley, leased to law firms, financial and insurance-services companies, technology and defense contractors, medical and health-service providers, as well as government entities. Josh Buchholz, Doug Ceresia and Matt Midura of NAI San Diego represented the seller on Old Town Plaza, a two-building, 60,490-square-foot creative-office project at 2251 San Diego Ave. in Old Town, leased to marketing, design and consulting firms as well as healthcare providers.

Alsadek, EVP of CBRE San Diego, says, “The properties' desirable locations in several stable Central San Diego submarkets, combined with positive overall office market momentum in the region, attracted strong interest from many buyers.”

Kenney says, “We are excited to acquire this value-add portfolio and to continue to attract innovative employers into high-quality office space. The buildings are located in thriving submarkets and are well-leased to a diversified and prominent tenant roster.”

He adds, “As part of our repositioning efforts, the Casey Brown Co. will be initiating an extensive capital-improvement and rebranding effort over the coming months.”

Alsadek: “The current trend for portfolio deals will continue, with only a handful of transactions in 2017.”

More recently, Casey Brown revealed that the firm is close to completing the first part of the revamp for the former home of the San Diego Union-Tribune into a modern and highly amenitized work campus known as AMP&RSAND. The 33,000-square-foot site, featuring two separate buildings, is located at 350 Camino de la Reina. The repositioned five-story office tower will be completed in the third quarter, and the adjacent three-story building, which housed the printing presses, will be delivered in the first quarter of 2018. CBRE's office experts Matt Carlson, Jeff Oesterblad and Ryan Grant are leasing the property.

We spoke with Alsadek and Kenney about the rarity of office-portfolio sales in San Diego and what might encourage these sales.

GlobeSt.com: How common are office-portfolio sales in the San Diego market, and are they expected to become more or less common in the current environment?

Kenney: I would say we see one to three bigger portfolio deals a year in San Diego. We have really distinct submarkets and product types in the market. This deal involved three totally separate submarkets with different aspects. It's tough for buyers to find homogeneous pools of product and a submarket in which they can buy multiple properties. I don't see that changing much for 2017.

Aldasek: Portfolio sales are not that common in San Diego. Very few portfolio deals trade each year in the market. The current trend for portfolio deals will continue, with only a handful of transactions in 2017.

GlobeSt.com: What causes more office-portfolio sales to take place in this market?

Alsadek: Many of the suburban buildings in San Diego are less than 75,000 square feet. A portfolio helps buyers with operational efficiency and financing options, and in return, this helps sellers increase the buyer pool.

Kenney: San Diego has a lot of small buildings, and it's a good way for buyers to come in with some scale. Institutional funds need to write bigger checks. Specific to San Diego, buyers still view this market as more of a value play since prices haven't hit the high levels of San Francisco, Silicon Valley or the west side of L.A. Buyers still view us as relatively inexpensive, and some of these growing tech companies will start relocating people here; we're seeing some real blue-chip companies coming to town.

GlobeSt.com: What hinders office-portfolio sales in this market?

Kenney: You have such distinct submarkets. If you bought a portfolio in Sorrento Mesa, suddenly you have a lot of exposure to Sorrento Mesa, and that could scare off some people from aggregating.

GlobeSt.com: Is there anything else our readers should know about this particular sale?

Instant Insights /

The Rare SD Office-Portfolio Sale

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