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Kearny Real Estate Co. of Los Angeles and its joint venture partner, TriGate Capital of Dallas, recently acquired a vacant 74,000-square-foot flex! research and development building in the Rancho Bernardo submarket of San Diego. That purchase is a prime example of why commercial real estate observers say that short sales in a growing number of cases represent the preferred way out of a distressed asset for buyers, borrowers and lenders. Kearny paid $6.8 million for the 74,000-squarefoot R&D building, according to partner John Bragg, who notes that the building sold for $11 million in 2006. The purchase price represented 68% of the outstanding loan balance, and the new owners plan to invest $1.8 million immediately to renovate and reposition the property, with reserves set aside for future tenant improvements.

To Kearny, the deal represented “an opportunity to acquire a well-located, quality asset at a very attractive price ,” according to company vice president Jason Rosin. He says the property is in a submarket that “has bottomed out and should be one of the first to recover when the economy begins to improve.”

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