Investors to Reposition Inland Empire Office Portfolio After $42M Trade
Harbor Associates and Taconic Capital plan to renovate 368,000 square feet in the submarket east of Los Angeles
By Greg Cornfield October 17, 2019 6:20 pm
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The blooming industrial market in Southern California’s Inland Empire has started to bring with it new commercial office investment.
Harbor Associates, LLC, and Taconic Capital Advisors have purchased a San Bernardino office portfolio totaling 368,000 square feet for $41.7 million. The five properties range from 70,000 to 115,000 square feet in the Tri City Corporate Center — a 153-acre master-planned office park at 685 East Carnegie Drive. The total center includes 17 office buildings with 1.1 million square feet of space, and 390,000 square feet of retail space.
Harbor and Taconic Capital received financing from a subsidiary of Granite Point Mortgage Trust Inc., which is managed by Pine River Capital Management, LP.
Harbor plans to reposition the properties, which are collectively 55 percent leased to 28 tenants, and represent the only block of contiguous office space with more than 75,000 square feet in the Inland Empire.
Property records show the properties were owned by Texas-based real estate firm Hines and Los Angeles-based Oaktree (OAK-A) Capital Management, which had purchased the entire center from Rancon Real Estate in 2015. Rancon developed the existing center in several phases between 1986 through 2008.
Harbor’s portfolio in Southern California now includes 19 projects with more 2.4 million square feet, according to Harbor principal Justin Loiacono.
“We intend on building on our recent momentum by sourcing new opportunities and pursuing similar strategies in the Inland Empire office markets with interesting demand drivers with the goal of acquiring $250 million over the next 12 months,” Loiacono said.
Cushman & Wakefield released a report this week showing office vacancy rates in the Inland Empire dropped slightly to 7.5 percent in the third quarter this year. Average asking rent was $1.96 per square foot. Net absorption was 62,700 square feet, which was the highest since second quarter 2018.
“The Inland Empire has a pretty dramatic supply-demand imbalance of large contiguous blocks of space,” said Harbor principal Paul Miszkowicz. “Moreover, the market hasn’t seen any new office construction since 2009. … We think there’s unmet demand in this space.”
Anthony Delorenzo, Todd Tydlaska, and Sammy Cemo of CBRE (CBRE) advised the seller.
