SKB, Praedium Acquire 40% of Amberglen

"The upside lies in leasing up the vacant space and giving the buildings the attention they have needed," says SKB principal Todd Gooding. "With the recovery under way, our intelligence tells us that Westside vacancy will be in the single digits by 2009. Moreover, we are buying the more traditional suburban office space, and there isn't a lot of that stuff out there; it's mostly single-story tilt-wall industrial buildings built out for office use."

The 1.24-million-sf Amberglen Business Center is one of the best business parks in the tech-heavy Sunset Corridor. Amenities include a day care center, a gym, a lake and hiking trails. Principal Real Estate Investors of Des Moines, acquired the 21-building, 1.2-million-sf business park in November for $114 million. Shortly thereafter, Keith Young and Monty Haynes of GVA Kidder Mathews in Portland were hired to sell off half of the park. The brokers have told GlobeSt.com the reason for the sale is that Principal did not want $114 million worth of exposure in one market.

The portion of Amberglen now controlled by SKB and Praedium includes eight buildings and one ground lease in three clusters of three buildings located in different areas of the park. Seven of the eight buildings are two- and three-story class A and B office buildings and the eighth is a single-story flex building on a ground lease. The seven multistory buildings range between 63,764 sf and 74,605 sf. The single-story building is 20,648 sf.

Gooding tells GlobeSt.com the anchor tenants of the SKB-Praedium Amberglen portfolio are Cascade Microtech and Planar Systems, which each have their corporate headquarters at the park. Cascade Microtech leases 127,000 sf in two buildings (2430 and 2345), but is looking to shed about 25,000 sf. Planar occupies 109,700 sf in two buildings (1195 and 1400), not including the building on the ground lease, which it also occupies, and has no current plans to shed any of the space.

SKB and Praedium have hired Grubb & Ellis as the leasing agent and Cushman & Wakefield as the property manager. G&E brokers Dave Squire, Brandon Frank and Eric Haskins have the marketing assignment. The overall Sunset Corridor office market had vacancy of 27.6% in the second quarter, down from 31.9% in the same quarter of 2004, according Grubb & Ellis. By comparison, the Washington Square/Kruse Way area's vacancy shrank from 10.6% to 6.6% during the same period.

"SKB is buying at the right time to take advantage of where the market is headed," says Haskins. "They are buying some good quality product, so as market demand makes its way back up Highway 217 (from the Washington Square/Kruse Way area) and out Highway 26, people will be looking in the Sunset Corridor, and there's no better park in the state than Amberglen."

The Praedium Group focuses on underperforming and undervalued assets. Praedium was formed in 1991 with an international investment bank as its sole investor and has made $4 billion in total investments to date. Praedium launched its first commingled fund program in 1994 and has since sponsored several additional funds that have attracted public and corporate pension funds, financial institutions, insurance companies and endowments.

Amberglen is the third acquisition of its sixth fund, which recently closed on its final equity raise and now has some $700 million of equity to invest. About 90% of the investors from fund five invested in fund six. Hughes says Praedium 6 will invest in mid-cap assets throughout the United States and Canada in the $10 to $70 million range, targeting multi-family, office, retail and industrial property types.

Praedium executive Chris Hughes tells GlobeSt.com that the Amberglen acquisition is not the first it's done with SKB and will not be the last. "We have done many deals with those guys and have had a very good track record together," he says. "We've made a lot of money together."

SKB, founded in early 1993, specializes in opportunistic investments in Western US projects having total capitalization in the $15 million to $100 million range. Its clients include high-net-worth individuals, families and trusts. They invest with SKB through SKB Securities in minimum units of $100,000. The firm acquired about $260 million of real estate in 2004 and expects to acquire another $350 million of real estate in 2005.

The next SKB-Praedium acquisition will be a portfolio of buildings in Phoenix that Hughes confirms is similar to Amberglen in size and type. The deal is scheduled to close at the end of the month.