SAN DIEGO-KBS Realty Advisors has sold Paseo Del Mar, a 232,307-sf suburban office complex in the San Diego submarket of Del Mar Heights, for $147.9 million in an all-cash deal to German fund, Union Investments. The property acquired by the fund, which was advised by Metzler North America, consists of three, three-story office buildings, each with one level of subterranean executive parking.

Roy Bajtel, head of Union’s US Representative Office, handled the transaction and ran thenegotiations for Union Investments. Lynne LaChappelle and Robert Prendergrast of Jones Lang LaSalle represented KBS in the transaction, which closed Thursday for $636.45 per sf.

“It’s the most substantial submarket asset really in San Diego,” LaChappelle tells, noting that the property was 71% pre-leased during construction.

Major tenants in the class A buildings include: Sheppard Mullin, JMI, Pillsbury Winthrop, Jones Day and UBS. The buildings are located at 12255, 12265 and 12275 El Camino Real in Del Mar Heights.

KBS acquired Paseo Del Mar in January 2007 at a price of $120 million, or $516 per sf. When KBS purchased the property it was 73% leased. The Newport Beach-based investment firm then took the property to 96% leased in 18 months, says KBS senior vice president Steve Jarecki, who oversees acquisitions and dispositions for the Southwest US.

“Our investors have many different reasons to want capital back, and in this case there was a desire to receive back the capital plus the profits,” Jarecki tells

He notes that lease rates KBS was signing tenants to were at or above market-rate for the area. “We were signing leases at $4.30 psf plus electrical. It’s the finest suburban property in San Diego County,” he says.

Alan Araki, managing director of acquisitions for Metzler, says Paseo is situated in “probably one of the best office markets in San Diego.” Del Mar Heights attracts a broad range of office tenants, and the area has had a lot of interest expressed in it as of late from foreign investors, probably due to the weak US dollar, he says, adding, “Foreign investors are looking for quality assets in quality markets.”

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