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FREMONT, CA-Pacific Coast Capital Partners LLC of San Francisco has assumed post close an $11.5-million B note loan from Barclays Capital. The note was part of the $81.5-million senior loan commitment to a partnership of JER Partners and TMG Partners.

JER and TMG used the financing to acquire an unstabilized 1.03-million-sf industrial portfolio here from Sunnyvale-based Renco Properties. “The B note portion of the financing…was especially appealing to us because it meets our criteria for the higher rate of return that we anticipate by assuming the greater risk of the B piece of the loan,” says PCCP managing director Bryan Thornton.

The acquired portfolio consists of 16 one- and two-story buildings built in the 1990s within the 200-acre master-planned Bayside Technology Park, which includes office retail and hospitality uses. The acquired industrial portfolio is roughly 60% leased with tenants that include Boston Scientific, Cirrus Logic, VA Linux Systems and Oryx Instruments.

TMG and JER paid an estimated $128 million for the portfolio. TMG chief executive Michael Covarrubias told GlobeSt.com at the time of the acquisition that his plan is to flip the fully leased buildings to investors in order to lower its cost basis and then lease up and sell off the remainder. The pro forma hold is three to five years, he says, but things likely will happen more quickly than that.

Thornton says he likes the investment because Fremont has become a more attractive market for a diverse mix of companies due to its central location with convenient freeway access to the East Bay employee base, Peninsula executive homes and downtown San Jose.

The 143-million-sf Silicon Valley R&D market saw overall vacancy fall to 21.4% in the second quarter of the year on close to 500,000 sf of net absorption, according to Cornish & Carey Commercial. Direct vacancy now stands at 16.4%, according to the report.

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