Deka Immobilien's DINA Fund Buys First Investment on the West Coast
The $47.5 million property was bought by Deka’s open-ended and dollar-denominated North America Fund, and marks its third US acquisition during the past nine months and first in Oregon.
PORTLAND, OR—6Y, an 11-story creative office building located in the central business district, has been sold to Deka Immobilien for $47.5 million. The 116,244-square-foot asset is located at 811 SW 6th Ave. and was renovated last year to appeal to tenants seeking creative office space in a walkable location.
The property was bought by Deka’s open-ended and dollar-denominated North America Fund and marks its third US acquisition during the past nine months and its first in Oregon. The fund had recently acquired a grocery-anchored retail property in New Jersey and an office building in Washington, DC.
“With the dollar-denominated fund, the goal was to invest in the US. It allows us to get yield and equity,” Driss Oualkadi, president of Deka Immobilien US, tells GlobeSt.com. “Although there is a strong US economy, there was one challenge: we had to hedge the equity. We decided to establish a new fund in the US beginning with $100 million, quickly followed by two others in the $160 million and $130 million range that are governed under the German Investment Fund. We were targeting office and retail in three different cities with a gateway cities focus.”
The building was repositioned through a strategic renovation that included upgraded creative office suites and lobby, and the addition of a tenant lounge overlooking Pioneer Square, a 14-person conference room, and a bike hub with lockers and storage.
The property occupies a corner parcel overlooking Pioneer Square, the focal point for the central business district. Pioneer Square is affectionately known as Portland’s “Living Room” and hosts year-round food trucks and more than 300 programmed event days each year.
Deka Immobilien was represented in the purchase by Colliers’ investment advisory group led by managing director Robert Stamm and executive managing director Andres Roldan. Local support was provided by Portland-based executive vice president Chris Johnson. NKF vice chairman Nick Kucha and directors James Childress and Bill DeLacy represented the seller, a venture of KBS and True North Management Group.
“This stabilized creative office asset in a Main-and-Main location in the city’s CBD was the perfect fit for Deka’s first acquisition in Portland,” says Stamm. “The purchase demonstrates the fund’s ongoing appetite for well-located, high-quality institutional assets, as well as its willingness to enter new markets with confidence based on our team’s market knowledge and experience.”
6Y also offers tenants with access to all five of the city’s MAX light-rail lines, all three streetcar lines and 25 bus lines, providing direct connectivity to every neighborhood in the Portland metro.
“This well-located multi-tenant urban office asset received strong interest from a wide range of buyers,” said Kucha. “Given the asset’s high quality irreplaceable location, tenant buildouts, stable in-place cash flow and recent leasing velocity, the bidding environment was highly competitive.”
The building is currently 90% occupied by a diverse mix of office and retail tenants including Industrious, Gensler and JP Morgan Chase.
The office market in the Portland metro area has remained robust through the first six months of 2019, according to a second quarter report by Kidder Mathews. Vacancy rates dropped slightly, while rental rates continued the upward trajectory that began in first quarter 2012. While net absorption dropped into negative territory for second quarter, the year-to-date level remains positive.
Second quarter was overall a less active quarter, as the market appears to be waiting for the more than 2 million square feet of office space still in the development pipeline to deliver. Yet, investment in Portland office property rebounded nicely in second quarter and pushed the average price per square foot to a new all-time high. Some experts argue that the equilibrium point in the Portland office market is approaching, and therefore it is expected that growth in the market should continue at a more reasonable pace, says the Kidder Mathews report.