SAN RAMON, CA-In one of the larger lease deals in the nation recently Bank of the West has signed a long-term agreement for a 240,000-square-foot class B office building at Bishop Ranch, a nine-million-square-foot business park by Sunset Development Company, which still owns about half of the park’s square footage. The bank intends to occupy the space in phases in late 2010.

Bank of the West says the three-story building known as Bishop Ranch 7 will be used to consolidate its East bay operations, which currently has 1,600 employees spread among seven buildings in Walnut Creek, Concord and Pacheco. Local brokers tell that the negotiated lease terms are being held very close to the vest because with concessions it was a below-market deal and Bishop Ranch is the marker maker locally. The annual full-service asking rate for the building was in the $26-$28 range.

“Lots of free rent,” one local broker responded when asked what likely got the deal done. “Bishop Ranch always has large contiguous spaces available (directly or indirectly) and until employment returns to traditional levels it’s going to be a dog fight because landlords are hungry for the tenants that are out there.”

Sunset Development’s EVP Ed Hagopian has consistently declined to comment on the specifics of lease agreements and this time around was no different. Regardless of whether “lots” of free rent was part of the deal it is common knowledge that Sunset has an advantage over many of the building owners in that it has owned Bishop Ranch for 30 years and maintains very low leverage on the properties therein.

As a result, generally speaking, it can offer the same or better space for less than many other building owners who have a lot of debt on their properties, either because they purchased at the top of the market or borrowed against it in the boom years. Now that values have fallen as much as 50% and occupancy has declined, highly-leveraged owners have very little room to wiggle and still make their debt payments while Sunset can still wheel and deal.

Built in 1989, Bishop Ranch 7 is one of 40 buildings in the park totaling approximately five million square feet that are owned by Sunset Development Co. The remainder of the park, approximately four million square feet, is owner occupied by Chevron, AT&T and Toyota. Current vacancy is approximately 12%. Bishop Ranch 7 is reportedly unencumbered by debt.

Bishop Ranch 7 is currently partially occupied by California News and Paychex, whose leases are expiring. Centex Homes previously vacated 62,000 square feet that it had been leasing since 2003. Both California News and Paychex will be relocated to other buildings within Bishop Ranch under new leases, Hagopian says, clearing the way for Bank of the West.

Another new tenant set to arrive in 2010 is the global staffing company Robert Half International, which will relocate its regional operations here from Pleasanton. The public company signed a long-term lease last June for an existing 236,000-sf, five-story building owned by Sunset. The company is currently housed in five building in the Hacienda Business Park in Pleasanton totaling 220,000 square feet. All told, Sunset leased one million square feet of space at Bishop Ranch in 2008.

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