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OAKLAND, CA-Scanlan Kemper Bard of Portland, OR has acquired the 598,000-sf Eastmont Town Center, a mixed-use office and retail center, for $77.6 million in a 50/50 joint venture with New York’s Praedium Group. The deal holds the promise of upside for the new owners, who acquired it substantially below replacement cost and with in-place rents that are more than 20% below estimated market rents.

Eastmont, which is approximately 89% leased, is a failed two-story indoor-outdoor shopping mall that the former owners converted to a well-leased government service center. The property, developed in the 1960s and 1970s, comprises 11 individual buildings and 1,857 parking spaces. The seller, Eastmont Properties Co., converted approximately 73% of the property to office space.

Among the conversions at the center is a former JC Penney department store that has been renovated for use as the Alameda County Health Department’s new Wellness Center. In addition, the Oakland Police Department has invested $14 million to convert a former Mervyns building into a new police station; other in-line and pad tenants include several other Alameda County agencies, Bank of America, Ross, AutoZone and Burger King.

The conversions give SKB a mixed-use property where 43% of the rentable area is leased in excess of 10 years by Alameda County and a total of 58% of the project is leased to government and credit tenants, with none of the 70 tenants’ leases representing more than 11% of the development. The Eastmont center is bordered by Bancroft Street, Foothill Boulevard and 73rd Avenue in a dense residential area of Oakland.

SKB’s three-year business plan calls for completing the conversion of the development to a government services center by repositioning the remaining strip retail space, upgrading common areas, roofs and mechanicals, and raising occupancy to 95%. SKB and Praedium acquired the property in a transaction brokered by Edward Suharski of Grubb & Ellis in San Francisco, who represented the seller. SKB, which is headed by chairman and CEO Bob Scanlan, represented itself.

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