PHOENIX-A 252,350-sf back-office portfolio has traded between two California investors, with Argus Realty Investors LP claiming the Deer Valley buildings for $51.3 million. The San Clemente, CA-based buyer beat 11 other bids with its knowledge of the market and a competitive price.

“We’d done some research on them as a buyer and heard good things about them when it came to closing deals and doing things they said they would, which is why we went with them,” says Ron Lack, executive vice president for San Diego-based Equastone. He says the 138,540-sf Northgate Business Center at 20401 N. 29th Ave. and 113,810-sf Blackhawk Corporate Center, a two-building complex at 2902 and 3010 W. Agua Fria Fwy., were put on the market because they’d reached stabilization.

“When we bought the portfolio in 2005, it had an occupancy of around 60%,” Lack says. “We were able to get the thing leased up to 100% over the last two years and stabilize it. That’s our goal and it was just an opportune time to sell.” Equastone acquired the portfolio, spread across 24 acres, in July 2005 for $34.3 million.

According to Jean Murphy, senior vice president-acquisitions with Argus, the stable tenant base and relatively low lease roll in the next two years were particularly attractive. She tells that four tenants already have signed leases to expand and renew. But, she isn’t discounting the asset’s upside. “Most of the tenants have leases with below-market rents,” she explains, estimating current rents are 15% below the area’s market rate.

Chris Toci, executive director with Cushman & Wakefield of Arizona Inc., agrees that the portfolio’s upside was particularly attractive to bidders. “The whole play here was that there is an in-place rent of $12.71 per sf net with the market asking $15 per sf net,” Toci says. “Argus can take those in-place rents and get some nice lift-up to get it to market rates. This had embedded upside through roll.”

Toci partnered with C&W associate Ted Harrison and analyst James Greaves to negotiate both sides of the transaction. C&W senior directors Tim Whittemore and Mike Sayre will continue to lease the portfolio.

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