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SAN ANTONIO-In an off-market transaction, Equastone has snagged the first class A office building sale in the Downtown since 2002. The 261,431-sf One Riverwalk Place, sitting at 52.4% leased, has sold for less than half of its replacement cost.

The San Diego-based buyer has confirmed that the two-acre footprint at 700 N. St. Mary’s St. has been bought for less than $100 per sf. The seller is the City Public Service Pension Fund, with Frost Bank as its trustee. The deal went full circle in 90 to 120 days. Jim Lundblad from locally based REOC Partners Ltd. represented the seller.

David Bourne, Equastone’s chairman, tells GlobeSt.com that significant change is on horizon for the 18-story high rise, situated on the banks of the San Antonio River at the edge of the River North redevelopment district. Negotiations are under way with several top-of-the-line restaurateurs to fill a riverfront vacancy and trigger a possible expansion of a dining courtyard as a destination location, Bourne says. “We are on the lookout for a top-notch restaurant operator that’s part of a larger credit-worthy group,” he says.

Gardner Peavy with Cambridge Realty Group Inc. says nearly 12,000 sf can be assembled for a destination restaurant. The local firm has taken over leasing and management duties for the high rise, which is just one of five class A buildings in the CBD. Talks also are well under way with a top-name bank to fill the long-dark 3,800-sf spot on the first floor, according to Peavy.

Todd Parker, asset manager and regional partner for Equastone’s Colorado region and San Antonio, says the repositioning is ticketed to take 36 months and then the asset will go up for sale in keeping with the new owner’s MO. InSite Architects is on board for interior design while interviews are under way with other architects for the full design package. A decision is due by the end of January. The lobby will be redesigned, common areas retooled, mechanical systems overhauled and 10 spec suites brought on line. At least $1 million will be spent, excluding the restaurant finish-out and tenant-improvement perks for other deals.

“The target for this building is to really create the boutique, class A office space in the Downtown,” Parker stresses. “We have to improve this building very, very quickly so new tenants can enjoy the benefits.”

Equastone intends to rename the building as part of the repositioning, which takes aim at returning tenants to the CBD after their flight in recent years to the north central and northwest submarkets. “The Downtown has been struggling with high vacancy for quite awhile,” Bourne explains. “We believe as rental rates in the submarkets to the north go significantly higher that Downtown is going to appear relatively more attractive.” The CBD vacancy hovers 20%.

Peavy says there are 80,000 sf of deals in the pipeline for One Riverwalk Place, with 15,000-sf floor plates as the selling point for the “boutique” strategy. “Are we going to be aggressive as far as marketing? Yes,” he says. “Do we feel Downtown is poised to do well? Yes. It’s not a desperate situation. It’s clearly on the upswing.” The building’s quoted rate, right now, is $21.50 per sf to $22 per sf versus the CBD’s class A average of $22 per sf to $23 per sf.

One Riverwalk Place, with a five-story parking garage, also sits at the gateway of a 194-acre redevelopment district recently designated for tax abatement incentives. If the plan comes to fruition, the area will yield nearly 2,000 residential units and blocks of street-level retail along a proposed three-mile extension of the riverfront.

Peavy says One Riverwalk Place is the “natural” benefactor of the River North project, part of which is envisioned as a new business corridor for the tourist-fueled Downtown. Several hotel projects are close to being announced.

One Riverwalk Place is Equastone’s third purchase in the city and second in a tourist mecca. Last week, Equastone made its first purchase in New Orleans, gaining recognition as the first private equity firm to buy a class A high rise since Hurricane Katrina. The investment group bought the 684,027-sf, 28-story Pan-American Life Center at 601 Poydras St. It was 75% occupied at sale time. Evan Stone with Jones Lang LaSalle in Dallas brokered the deal, with JLL winning the contract to lease and manage it.

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