TMG Closes on Hawthorne Plaza Buildings for $127M

SAN FRANCISCO-Locally based developer TMG Partners on Thursday closed on its $127-million acquisition of the 75 and 95 Hawthorne Plaza office buildings here from G REIT. Santa Ana-based G REIT acquired the building in early 2004 for $97 million.

The 418,668-sf complex located South of Market is anchored by multiple federal government agencies. The larger property, 75 Hawthorne, holds 334,400 sf in 20 stories. It was built in 1987 and is 92% occupied. The other property, 95 Hawthorne, is a five-story building constructed in 1910 (renovated 1990). It has 84,200 sf of rentable space that is fully occupied.

Tenants in the buildings include the Environmental Protection Agency, the Health Care Financial Administration and the US Department of Agriculture. The EPA leases 259,000 sf in the complex through September 2009; its annual rent at the end of 2005 was $7.12 million ($27.50 per sf), according to SEC filings. The total annual rental income from the complex was $10.76 million ($28.49 per sf) at the end of 2005, according to SEC filings.

When G REIT acquired the complex in 2004 from ITW Mortgage Investments, it was 97% leased. ITW took title the property through foreclosure in 2002. Edward Suharski of Grubb & Ellis represented G REIT in its sale of the property to TMG Partners. Suharski also sold the building to G REIT on behalf of ITW.

Earlier this month, TMG acquired 650 Townsend St. for slightly less than $200 per sf, according to local industry sources. The low-rise, 672,000-sf office property in the South of Market area is 50% leased. The largest tenant is Sega of America, which leases 160,000 sf. TMG Partners chief executive Michael Covarrubias told GlobeSt.com at the time of the transaction that the first order of business will be to cut in another entrance and add a new bank of elevators to improve access to and through the massive building. The plans also include activating the now quiet atrium area with a coffee shop and maybe a fitness center.

In July, a joint venture of TMG and JER Partners of McLean, VA added to its holdings within Bayside Technology Park in Fremont. The duo acquired 425,000 sf of R&D space in five buildings. The space is fully leased to Boston Scientific, Mattson, Themis Computer and Lexar Media.

Last September, the duo acquired 1.02 million sf in the park that was 60% leased. The purchase price was between $120 and $130 per sf, according to local sources, which equates to between $122.5 million and $133.5 million. In March, after inking a 94,500-sf lease deal with Asyst Technologies, the company re-traded 315,000 sf of fully leased space to Legacy Partners for approximately $60 million, or $190.50 per sf, according to local sources.

Also in July, TMG sold a 46-acre assemblage in Santa Clara to Yahoo Inc. for around $100 million. The Internet company’s plans are to eventually raze the existing buildings on the property and replace them with approximately 2.5 million sf of class A office space in multiple mid-rise buildings.