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SAN FRANCISCO-A fund of locally based Shorenstein Properties and SKS Investments have paid $85 million for the Oyster Point Business Park and Oyster Cove Marina, a six-building flex/industrial property with adjacent 235-berth marina in South San Francisco. The land currently holds 400,000 sf of 1980s-era industrial buildings that are 88% leased, however; thanks to a planned rezoning by the city the land could be re-entitled for approximately 1 million sf of high-end office or biotech R&D space.

Located at 375-389 Oyster Point Blvd., the property is 5 minutes north of the San Francisco International Airport and surrounded by life science companies. It is also within walking distance of a new ferry terminal that is supposed to open next year. A source familiar with the property and the buyer tells GlobeSt.com that Shorenstein has no near-term plans to redevelop the site – though that is the plan eventually — and is currently signing multi-year leases for certain buildings within the development.

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 told GlobeSt.com earlier this year 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. Some brokers had suggested the property could garner $120 million, which would have represented a 4% cap rate. At $85 million, the cap rate is closer to 6%. A marketing brochure estimated 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.

The seller is Shelton Investments of Honolulu, HI, which contracted 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.

Shorenstein Properties made the purchase on behalf of its ninth investment fund, Shorenstein Realty Investors Nine, L.P., a $2.062 billion private commingled fund formed in the spring of 2007. “We believe the property affords a tremendous opportunity for our investors to enjoy stable current income over the next few years with the added long term potential of significant value creation through carefully-planned development at the appropriate time in the market,” says Shorenstein chief executive Douglas Shorenstein.

SKS managing partner Paul Stein says the JV is a great follow-up to the duo’s development of a new headquarters for FibroGen in Mission Bay, which is slated for completion in late 2008. “We view the redevelopment of Oyster Point as another tremendous opportunity to…develop another life science campus for the Bay Area,” he says.

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