Life after foreclosure differs for office properties in SD County

Monday, August 26, 2013

 

In San Diego County, of three office buildings that have gone through foreclosure, one is making strides, while two others continue to struggle.

All three properties are under the control of LNR Partners(NYSE: LNR), which bills itself as the world's largest servicer of distressed commercial real estate.

Kearny Mesa’s 139,623-square-foot Seville Plaza was sold at a trustee’s sale in October 2012 to LNR, which took the property on behalf of lender Mortgage Electronic Registration Systems for $12.22 million.

The property had $27.64 million owed on its note at the time of the foreclosure.

Located at 5469, 5471 and 5473 Kearny Villa Road, it had been owned by a group of local investors along with a unit of Pacific Office Properties Trust before going into foreclosure.

LNR owns the property free and clear.

“They are not long-term holders. They get some leasing done, and then they get out,” said Richard Gonor, a Jones Lang LaSalle (NYSE: JLL) senior vice president who represents the property.

Gonor said Seville Plaza -- only about 50 percent leased in 2010--2011 -- has a lease out for signature for 47,000 square feet that would bring the property to more than 90 percent full.

“There was a lot of interest from larger tenants,” Gonor said.

Gonor didn’t reveal details about the tenant other than to say the space would be used for administrative uses.

Seville Plaza had been 90 percent leased as recently as June 2009.

Along with stabilizing Seville Plaza’s occupancy, Gonor said LNR is in the process of renovating the exterior landscape, the mechanical and HVAC systems and recently resurfaced the parking lots at the property.

LNR also acquired the Paseo Summit (formerly known as Carlsbad Corporate Plaza) through foreclosure in January 2013 on a bid of $10.32 million.

The property that had $27.35 million owed on it at the time of the foreclosure

The loan was reportedly 28 months late before it went into foreclosure according to a Bloomberg News report. Merrill Lynch Mortgage Lending originated the loan.

(PHOTO)

A unit of Davlyn Investments had acquired Paseo Summit for $24.6 million in April 2007.

The two-building, 75,422 square-foot office complex was built in 2000. The property consists of a pair of two-story office buildings and 313 parking spaces.

The CoStar Group (Nasdaq: CSGP) reported that the 41,685-square-foot office building at 6185 Paseo del Norte was 11 percent vacant at the time of the foreclosure and 6183 Paseo del Norte was 42.3 percent vacant.

Travis Ives, a senior associate principal with Cushman & Wakefield’s healthcare practice, said while the complex that he calls Paseo Summit is still about 33 percent vacant the property it is suited to the medical office market.

“This is kind of an in between [between medical and pure office] property," Ives said. "It’s not where most of the office is in Carlsbad. This caters to people who might want to go into Encinitas or another coastal city but can’t find the space … We do have good activity.”

Ives said it is a little early to ascertain just how quickly the property will lease, but he expects Paseo Summit to be stabilized (at a 90 to 95 percent occupancy) within the next 18 to 24 months.

Locally-based Davlyn may no longer own Paseo Summit, but has continued to purchase properties in San Diego County.

The firm paid $18 million to acquire The Bluffs, a 68,708-square-foot office building on West Bernardo Drive in Rancho Bernardo last June.

The 131,760-square-foot Gateway Chula Vista II property -- at 333 H St. in Chula Vista developed by James Pieri Sr., ofMountain West Properties in 2005 -- had $45.47 million in debt by the time it went back to the U.S. National Bank Association.

U.S. National was successor in interest to lender Bank of America (NYSE: BAC), which took the property back for $19.5 million in December 2011.

Karen Johnson, a Colliers International associate vice president, said this property is also under LNR’s control.

(PHOTO)

The building was 23.8 percent vacant as of the date of the foreclosure, and still had more than 57,000 square feet available for lease at the time of CoStar’s survey within the past month.

According to CoStar the building has 109,188 square feet of office and 22,572 square feet of retail space.

Johnson said there has been a lot of interest at the Chula Vista property, but cited no new office leases.

She did say there is a lease for a 15,000-square-foot space on the ground floor that will be taken by a tenant similar to theL&L Hawaiian Barbecue restaurant, which vacated the premises more than a year ago.

Pieri also developed the adjacent, 100,320-square-foot Gateway Chula Vista I property before selling it in the late 2000s.

He paid $24 million within the past month to buy it back. Mountain West reports that property is 97 percent occupied.

  • Posted on   08/27/13 at 01:45:52 AM   by Josh  | 
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