SOUTH SAN FRANCISCO-The price and the buyer are still under wraps but a prime 25-acre waterfront asset here that includes the 235-berth Oyster Cove Marina is under contract, a source familiar with the transaction tells The land currently holds 400,000 square feet of 1980s-era industrial buildings but could be replaced with approximately 1 million sf of high-end office or biotech R&D space.

Located at 375-389 Oyster Point Blvd., the property is 15 minutes south of San Francisco and 5 minutes north of the San Francisco International Airport. It is also within walking distance of a new ferry terminal that is supposed to open next year. More than 100 life science companies are located within one mile of the property, according to a marketing brochure from listing brokerage firm, NAI BT Commercial. The listing brokers, managing director Gary Willard and senior managing partner Randy Keller, could not be reached Friday for comment.

Several well-heeled buyers reportedly submitted best and final offers, including REITs, private developers and would-be owner-users. Chief South San Francisco Planner Susy Kalkin tells that Alexandria Real Estate Equities and Healthcare Property Investors Inc. and Hines were among the six or so companies that had conversations with the city about potential entitlements for the site.

“It’s a gorgeous site surrounded by water,” Kalkin says. “There’s not very much underutilized land left [in South San Francisco]; it’s a very unique parcel.”

The property was not priced when it came to market. A marketing brochure estimates that the property’s year-one NOI (including the marina) for the new owner would be $4.80 million, rising to $4.96 million in year two and $5.4 million in year three. If the buyer acquires it at a 5% cap rate the purchase price would be approximately $100 million. A price of $120 million, as some have suggested it might garner, would translate to a cap rate of approximately 4%.

The property owner is believed to be Shelton Investments of Honolulu, HI, which reportedly contracts out property management to AMB Property Corp., a San Francisco-based industrial REIT. A tenant roster was not immediately available. Discovery Partners International in 2006 transferred a 52,000-sf leasehold interest in one of the buildings to BioFocus, according to SEC filings. The lease expires at the end of November 2008, according to SEC documents. BioFocus uses the space to provide “compound management services” for its clients. Some of the space has been subleased for use as a small molecule repository for the National Institutes of Health Roadmap Initiative, according to SEC documents.

The 42.8 million-sf Peninsula office market that runs between San Francisco and the Silicon Valley was flat through the first three months of the year on an overall basis. CB Richard Ellis is reporting that net absorption for the first quarter was nominally positive, resulting in direct vacancy rate of 9.0% and an overall vacancy rate (including sublease space) of 11.2%.

The Peninsula-wide weighted-average asking office lease rate also was largely unchanged at $4.24 per sf per month but is up 33% from this time last year. The Northern Peninsula, which includes the South San Francisco, Brisbane and San Bruno submarkets, saw average asking rates fall 3% to $3.12. The market rate for life sciences office space, which typically requires a more expensive build-out that traditional office, is approximately $4.00 Net, according to NAI BT.

The South San Francisco market specifically has a total of 2.52 million sf of office space, a direct vacancy of 7.6% and an overall vacancy of 8.7% as of the end of March. The asking lease rate for class A space in South San Francisco is $3.50, according to CBRE. Net absorption in the first quarter was negative at approximately 40,000 sf. Just over 300,000 sf was under construction.

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