Goldman Sachs Asset Management, Montana Avenue Buy San Diego Industrial Park for $46M

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Goldman Sachs Asset Management Private Real Estate (GSAM PRE) and Los Angeles-based developer and investor Montana Avenue Capital, in an equity joint venture, have acquired a 13.6-acre, nine-building business park in San Diego, Calif. for $45.7 million, Commercial Observer has learned.

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Centerpark Plaza is located at 6885 Flanders Drive. It includes eight industrial flex buildings and one office building, comprising 204,143 square feet of space, and is situated in the Sorrento Mesa submarket of San Diego. 

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An aerial view of Centerpark Plaza. Courtesy: Dekel Capital Partners

The acquisition allows the joint venture to offer tenants flex research and development (R&D) space while maintaining the optionality to convert the site into a collaborative indoor-outdoor Class A creative office campus in the future.

“In the GSAM PRE platform we’ve been targeting industrial properties but in a few specific areas, and one of those areas is the Sorrento Mesa, San Diego area,” Joseph Sumberg, a co-head of GSAM PRE, told CO. “There’s a dynamic that exists there that’s pretty interesting from an investment perspective. In Sorrento Mesa in particular there is reduced inventoryor the supply is negativein flex product because of the fact that people are actively acquiring flex R&D industrial product and turning it into creative officewhich is a fine investment thesis, it’s just not what our investment thesis is, and not what this investment is about for us.”

Sorrento Mesa has been a hub for life sciences and for R&D because of its proximity to places like Scripps Ranch as well as the Sanford Burnham Prebys Medical Discovery Institute, Sumberg said.

The joint venture purchase was arranged by Los Angeles-based brokerage firm Dekel Capital and negotiated by Dekel Founder and Principal Shlomi Ronen and Senior Vice President Max Friedman.

“We’ve known [Montana Avenue Capital] for many years. This was our first deal together. Historically, they’ve had a small group of family office and institutional capital partners for deals,” Ronen told CO. “This deal, from a risk profile standpoint, was a little bit lower risk, yielding lower, which didn’t match the capital. This [transaction] was a good opportunity to create a new capital relationship for them.”

Montana Avenue Capital Vice President Brad Pennington told CO: “[Our firm] has successfully repositioned office and industrial assets into creative environments across Southern California. We believe that the success of this strategy can be attributed to several factors including the region’s critical density of higher education and research institutions, the high number of prominent corporations in rapidly growing technology industries, and also a deep and talented employment base that prefers contemporary work environments that offer open floor plans and indoor and outdoor work options.”

Centerpark Plaza is GSAM PRE’s first investment in the area. It plays in to the company’s larger strategy of buying industrial real estate near educational and research institutions, prominent corporations and a large employment base.

Industrial flex properties will remain part of GSAM PRE’s strategy going into 2018, in fact “we’d like to be acquiring more [properties],” Sumberg said. “It’s very hard to access in the marketplace as we’re really selective in what we’re looking for and where. We see a lot of industrial flex deals that are highly built out on the office side, which isn’t a great dynamic for us. To the extent that we see opportunities that look like this one and have the same characteristics as Centerpark we are going to be extremely aggressive..however these opportunities don’t come along very often.”