RANCHO CORDOVA, CA-The Hines US Office Value Added Fund has sold a 10-building portfolio at Capital Center here to a client of DRA Advisors of New York for $175 per sf or $92.99 million, according to local industry sources. The fund acquired the property in September 2004 for $69.5 million and since upgraded common areas, mechanical systems, landscaping and parking lots.

Rancho Cordova is a suburb of Sacramento. Capital Center is located on White Rock Road near Highway 50. The portfolio, known as Capital Center II and III, is currently 87% leased to tenants including Bank of America, St. Paul Travelers, Delta Dental and the State of California.

A source at Hines confirmed the transaction for GlobeSt.com but declined to confirm the sale price or reveal the IRR for its investors. Hines SVP and fund manager David Congdon says that during its ownership of the property, occupancy improved by 20% and operations also improved. “We added significant value and realized exceptional investment performance,” he says.

Last month, Hines acquired a pair of 45,000-sf office buildings in the Prospect Park area of Rancho Cordova from TA Associates Realty of Boston for about $10 million. The company plans to renovate and release the buildings, which were occupied by the Franchise Tax Board and are now vacant.

In November 2005, Hines REIT acquired the 349,000-sf 1515 S St. office complex in Sacramento from JB Management LP for about $67 million, or $190 per sf. The State of California leases all of the office space (340,169 sf). Hines VP Cameron Fletcher says the company plans to expand its presence here “even further.”

Hines US Office Value Added Fund was formed in December 2003 to acquire office properties in CBD and suburban markets where value can be created through leasing, redevelopment and operating strategies. Its investment window closes in December; no new fund has been announced.

Having sold Capital Center, the fund now owns approximately three million sf in seven properties that it values at approximately $580 million. Some of the properties in the portfolio include One Ravinia Dr. (Atlanta); Bank of America Center (Houston); Bank Plaza (Los Angeles); and Mountain View Corporate Center (Broomfield, CO).

DRA Advisors is a registered investment advisor specializing in real estate investment management services for institutional and private investors, including pension funds, university endowments, foundations and insurance companies. The firm currently manages over $8 billion in assets, including 500 individual office, retail, multifamily and industrial properties. Hines portfolio of projects–including all projects underway, completed, acquired or managed for third parties–totals approximately 345 million sf in approximately 900 properties.

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