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SOUTH SAN FRANCISCO, CA-Centrum Properties has gained approval from the local planning commission for an upgrade and modernization of SFO Logistics Center, a mostly vacant 572,000-square-foot building that Centrum and Angelo, Gordon & Co. jointly acquired last year from the federal government. The purchase included adjacent land that Centrum last year said it would use to expand parking and add 52,000 square feet of high-cube warehouse. Originally constructed in 1950, the logistics center is expected to re-open in early 2010.

SFO Logistics Center is located at 1070 San Mateo Ave., one-quarter mile from the San Francisco International Airport and close to the confluence of interstates 280 and 380, and the Bayshore Freeway. The building has historically been used as a federal government services distribution center but those tenants had been vacating space for the two years leading up to the sale due to its deterioration. At the time the sale closed, the logistics center was 11% occupied.

Centrum and Angelo Gordon did not reveal the purchase price at the time of acquisition but said the all-in cost to acquire, upgrade and lease up the 572,000-sf warehouse, and then add and lease up the new building, is expected to come in around $80 million. Holliday Fenoglio Fowler said it arranged a $56.34-million acquisition loan through Capmark Finance and that the loan represents 70% of the total project cost. The 36-month, non-recourse adjustable-rate loan floats 325-basis points over the 30 Day LIBOR index.

The CapEx plan includes better ingress and egress, more loading docks, additional parking and structural upgrades. Once the work is completed, the expectation at the time of acquisition was that the space would be leased out for between $1- and $1.10 per square foot per month, triple net. The property is expected to lease up quickly once improved because there is a dearth of large, close-in quality industrial spaces.

Centrum Properties is planning design-to-build upgrades to the facility based on the needs of prospective tenants. It hopes to gain LEED certification for the project upon completion. Centrum says the facility’s location near key research centers and emerging new technology start-ups makes it ideally suited for companies in the fast-growing green tech sector.

“The borrower realized an opportunity to take an existing asset with strong distribution qualities and an irreplaceable location, and add immense value by merging the property with the adjacent site, which will greatly enhance the distribution and logistical qualities of the asset,” HFF’s California executive Peter Smyslowski told GlobeSt.com at the time of the acquisition.

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