"For a user, buying as is can be advantageous as they can reducetheir occupancy costs by owning rather than leasing and [by]locking in a long-term, low cost loan because interest rates arevery attractive right now," explains David Bourne, Equastone'schairman. "The cost of owning the building, which is mostly thecost of the mortgage, will be lower now than if they leased theproperty."

An affiliate of Equastone, which specializes in opportunistic,value-add and core-plus investments, originally acquired thefacility in July 1996 for $4.7 million. The property generated anannual return of about 33% before becoming vacant in 2006.

"We bought the property in the worst of times in 1996 [when]property values in San Diego for this kind of real estate had hitrock bottom prices," Bourne says. "After the RTC debacle[Resolution Trust Corp., which liquidated insolvent savings andloans and sold the corresponding assets] and a mass downturn of SanDiego's economy, we enjoyed good cash flows during our ownershipperiod and the building remained 100% leased from 1996 through2005."