Publication: IPE Real Assets
BY Jon Peterson

California State Teachers’ Retirement System (CalSTRS) has been seeking to increase its exposure to real estate debt, offices and property funds via the secondary market.

As part of more than $2bn (€1.74bn) committed to real estate strategies in the second half of 2019, the $252bn pension fund allocated $648m to real estate debt investments.

CalSTRS confirmed to IPE Real Assets that it had committed $300m to 3650 Cal Bridge Lending, a real estate debt joint venture it established with 3650 REIT in 2018.

The pension fund said it had also committed $198m to PacificCal Debt III, a joint venture with PCCP, and increased its existing investment in an open-ended real estate debt fund managed by CrossHarbor Capital Partners by $150m.

CalSTRS also allocated $300m of new capital to BCal II, an existing joint venture with Beacon Capital Partners that invests in core US offices, and committed $300m to the office-focused DivcoWest Fund VI.

The pension fund is also investing in real estate funds on the secondary market, having set up a $400m separately managed account with Blackstone Strategic Partners.

Other commitments in the second half of 2019 included a $300m allocation to StradaCal, a joint venture targeting core apartments and mixed-use assets in the San Francisco Bay Area and West Coast markets.

Publication: Connect Media
BY Dennis Kaiser

In September 2017, DivcoWest and its local operating partner Ocean West, acquired a 1980s-era office building at 1420 Kettner Blvd., in downtown San Diego’s Little Italy district. Upon move-out of the former tenant and owner, U.S. Bank, DivcoWest and Ocean West immediately began a major renovation of the 123,000-square-foot building with the goal of converting it to a highly-stylized, boutique, Class A, office project that would appeal to a broad base of modern tenants. Prior to completion, and just 12 months into the project, the building’s leasing agents, Derek Hulse and Phillip Roberts of Cushman & Wakefield, announced a lease for the first three floors of the building with Spaces, an international co-working operator. Rebranded “Kettner & Ash,” the building reopened last month.

We asked Gregg Walker, DivcoWest’s Head of Business Development, to take us behind the redevelopment, and explain what sets the building apart from its neighbors, as well as why DivcoWest sees tremendous potential and opportunity in downtown San Diego.

Q: Gregg, what about Kettner & Ash appeals to tenants like Spaces?
A: Kettner & Ash has all the elements of a great building. It’s in a great location for tenants that want to be downtown, it’s walkable to more than 60 local restaurants as well as amenities throughout Little Italy, it’s close to major public transit, and it’s easily accessible from major freeways like I-5. Additionally, it is easy to get to and from the airport, and it’s surrounded by great housing options for employees who live, or want to live, in downtown San Diego.

We have also added amenities to the building that appeal to our target tenant base. For example, we have emphasized and invested in the building’s outdoor spaces, creating a common area balcony on the third floor that connects with an indoor tenant lounge. The tenant lounge provides a great venue for tenant to host events, meetings or just relax. The project offers resort-style locker rooms and showers for tenants who want to exercise at lunch or throughout the day, and the building also has its own café.

Q: What’s the timeline for Spaces to move in, and what does it mean to have a co-working tenant in the building?
A: We expect Spaces will move in sometime around early summer. Having a co-working space in the building, and in the neighborhood, acts as an incubator for entrepreneurs and start-ups who will continue to grow the business ecosystem in the downtown market. Furthermore, it spurs innovation and company formation, and provides our existing tenants flexible workspace when there is a need for immediate expansion or special projects

Q: What attracted DivcoWest to downtown San Diego?
A: We’ve had a lot of experience in innovation markets around the country, from Silicon Valley and the Bay Area to Seattle, Boston, Austin and New York. We see a lot of the same dynamics we’ve seen in those markets developing in San Diego. There is already a strong innovation economy here, great universities creating future tech entrepreneurs, and we see the beginnings of a migration toward downtown as a corporate location. San Diego has a high percentage of Millennial workers in its population, and that demographic wants to be downtown where there is vibrancy and more relevant lifestyle options for them than they might find in the outer suburbs. Downtown still has housing options that compare favorably to other higher-priced West Coast markets, and the development going on right now will continue to attract employees of the innovation economy. That means employers needing to recruit and retain talent are starting to follow. We’re also seeing a trend toward companies operating a ‘distributed real estate’ model. So, while they may keep a headquarters in the suburbs or a nearby market, they may want another location so that their employees living or moving downtown have a space to work and no commute, as well as tapping a larger labor pool for recruiting new employees.

Publication: The Real Deal
BY Tina Daunt & Jerome Dineen

An affiliate of investment firm Rockwood Capital has paid $65.7 million for the 1930s-era Telephone Building in Santa Monica. Verizon maintains a condominium stake in the creative office property.

The seller, DivcoWest Real Estate Investments, had acquired the 58,000-square-foot building three years ago for $52 million.

The most recent sale pencils out to around $1,100 per square foot, compared to the roughly $900 per square foot DivcoWest paid. San Francisco-based DivcoWest, founded by Stuart Shiff, announced the deal. JLL’s Andrew Harper, Michael Leggett, Doug Bond and Matt McRoskey represented the seller.

DivcoWest undertook further improvements on the building, after Pacshore spent three years restoring, updating and seismically retrofitting it. Pacshore paid $19.5 million for the property in 2012, in partnership with Boston-based Alcion Ventures.

In 2018, DivcoWest secured landmark status for the six-story complex, which was constructed in the Art Deco style and the federal government used it after the Great Depression.

DivcoWest still has a strong presence in the Los Angeles area with high-profile properties that include 331 N. Maple Drive office complex in Beverly Hills — built by David Geffen — 1600 Vine apartment complex in Hollywood and the UTA Plaza office campus in Beverly Hills.

SANTA MONICA – January 17, 2020 – DivcoWest has sold its interest in the Telephone Building, a historic, six-story building in downtown Santa Monica, Calif to an affiliate of Rockwood Capital. Terms of the transaction were not disclosed.

DivcoWest purchased the 58,000 square foot creative office and retail interests in the property in 2017. Over its ownership, DivcoWest completed lease-up, made capital improvements and achieved historical landmark status for the building from the City of Santa Monica under the Mills Act, a move which will ensure preservation of the Art Deco structure.

“Santa Monica’s growth has continued to excel in recent years and the Telephone Building’s location and unique appeal to tenants as a jewel-box asset, with landmark status, will preserve its long-term value. We’re proud of the opportunity to have owned it and are confident it will flourish in its next chapter under Rockwood’s stewardship,” said Mike Provost, Managing Director at DivcoWest.

A JLL Capital Markets team led by Managing Director Andrew Harper, Senior Managing Directors Michael Leggett and Doug Bond and Associate Matt McRoskey represented the seller.

DivcoWest currently owns several major commercial assets in Southern California including 331 N. Maple, 1600 Vine, UTA Plaza in Los Angeles; Glendale Plaza in Glendale; and 1420 Kettner and DiamondView East Village in San Diego. The company focuses on acquiring and improving commercial assets in strong innovation markets. It also has major holdings in the San Francisco Bay Area, Austin, Boston, New York City, Seattle, and Washington DC.

Publication: Globest.com
BY Lisa Brown

2 West Santa Clara was built in 1910 as the headquarters of First National Bank and most recently was the offices of lumber company, Pacific States Industries, with a Walgreens on the ground floor. In 2017, DivcoWest acquired the value-add investment in the part of downtown where Google has accumulated a large number of properties.

Later that year, DivcoWest began a renovation of the building, which will be ready for occupancy in the first quarter. The renovation includes updating the facade and office interiors to appeal to a more creative tenancy.

“DivcoWestrs comprehensive modernization program has transformed 2 West Santa Clara into an unmatched creative office location in the heart of downtown San Jose,” Jeff Arrillaga of Newmark Knight Frank tells GlobeSt.com.

The 100,000-square-foot building has been a single-tenant location in the past, and possibly could be again. However, the opening up of each of the 10 floors and connecting of the first and second mezzanine floors means that the property should appeal to a broad range of tenants including smaller users looking for a full floor of space. Floorplates run from about 7,000 square feet to 12,000 square feet, and the first and second floors together could provide up to 21,500 square feet if taken together and interconnected. The renovation opened up the space to provide higher ceilings, more natural light and minimal column lines.
One of the highlights of the renovation is the private roof deck located on the fifth floor, which creates an outdoor workkommunity space with views of the hills and downtown.

Another key selling point of the building is its location near many existing planned major public transit options. It sits next to a Valley Transit Authority light rail station, allowing quick access to the airport, Diridon Station (the epicenter of Googlers proposed campus) and surrounding areas including Mountain View. It is also near the proposed site of the future BART station in downtown San Jose. And, it is surrounded by retail, restaurant, hotel and other amenities including the San Jose Art Museum two blocks away.

The brokers marketing the space are Arrillaga and Michael Saign of Newmark Knight Frank.
“The combination of customizable, creative interiors and a private roof deck are two of the project features we have received the most excitement about to date,” Saign tells GlobeSt.com.

Office activity in Silicon Valley remained strong in the third quarter of 2019, posting positive net absorption for the eighth quarter in a row and bringing the year-to-date total absorption to just under 1 million square feet, according to a third quarter office report by Newmark Knight Frank. The office market showed a slight slowdown with net absorption of 129,780 square feet compared with the second quarters 461,828 square feet. Moreover, the total square feet leased increased by more than 1.8 million to 4.45 million square feet, says NKF.

Publication: Commercial Property Executive
BY Lisa Brown

Kairoi Residential of San Antonio, Lincoln Property Co. of Dallas and DivcoWest of San Francisco have formed a partnership to develop the 6xGuadalupe project, a mixed-use tower in downtown Austin, Texas. The site preparation will begin with the demolition of the existing Extended Stay America hotel located at 600 Guadalupe St., scheduled for October 29.

The LEED Gold-seeking AAA-Class project will rise 66 stories high, totaling 587,780 square feet and will comprise 349 multifamily units on floors 33 through 66, office floors between levels 14 and 32, as well as 11 floors of parking and 14,550 square feet of ground-floor retail space. Office floor plates will range from 30,241 to 35,501 square feet. The office portion is slated for completion in late 2022, while the delivery date for the residential portion has yet to be announced.

The building will feature private outdoor terraces totaling 35,000 square feet, an on-site fitness center and high-speed elevators. The residential units will include a number of penthouses with access to a private rooftop club room, dining room, outdoor amenity deck and swimming pool.

Lincoln Property Co. is the developer of the commercial segment, while Kairoi Residential will handle the construction of the multifamily component. Gensler is the project’s architect.

NEW YORK – August 8, 2019 – DivcoWest purchased 540 Madison Avenue, a Class A, 39-story, ~291,000 square foot, boutique office tower in Midtown Manhattan’s Plaza District.

Convenient to multiple subway lines and a short walk from Grand Central Terminal, the building’s floor plates range from +/-7,000 – 11,500 square feet, customizing to full-floor users.

“DivcoWest continues to like New York’s fundamentals as an innovation hub,” said Ariel Aber, Senior Director-Acquisitions, “We are pleased to add 540 Madison Avenue to our portfolio and believe its core and central location, surrounded by transportation and amenities and strong tenant roster make it an attractive building.”

DivcoWest plans to locate its New York office at the property.

Publication: Globe Street
By Lisa Brown

DivcoWest recently purchased West Lake Union Center, a 10-story class-A office building at 1505 Westlake Ave. North in Seattle’s popular South Lake Union submarket for an undisclosed price. West Lake Union Center was constructed in the early 1990s and offers 218,454 square feet of office space as well as subterranean parking for more than 450 cars. Tenants enjoy the building’s 10-story atrium and views of Lake Union and downtown Seattle.

“Our focus on Seattle is based on strong tenant demand across a wide range of innovation and supporting industries, “said DivcoWest’s Beau Heidrich. “South Lake Union is a particularly desirable location for many of the tenants we regularly interact with and we are excited to begin investing in this property to bring it to its full potential as a meeting place on the lake for tenants large and small.”

 

VIEW PDF

SEATTLE, WA – June 6, 2019 –DivcoWest has purchased West Lake Union Center, a 10-story Class A office building at 1505 Westlake Avenue North in Seattle’s popular South Lake Union submarket.

Commenting on the market, DivcoWest’s Beau Heidrich said: “Our focus on Seattle is based on strong tenant demand across a wide range of innovation and supporting industries.” “South Lake Union is a particularly desirable location for many of the tenants we regularly interact with and we are excited to begin investing in this property to bring it to its full potential as a meeting place on the lake for tenants large and small,” he added.

West Lake Union Center was constructed in the early 1990s and offers 218,454 square feet of office space as well as subterranean parking for more than 450 cars. Tenants enjoy the building’s 10-story atrium and sweeping views of Lake Union and downtown Seattle.

Publication: San Jose Spotlight
BY Janice Bitters

One of downtown San Jose’s most prominent office towers, known as 50 West, or the KQED building, is set to sell to developer Jay Paul Co. in a deal that industry insiders say will break records and set a new high-water mark for commercial space in the city’s urban core.

“It certainly as recognizable a Class A building as exists from that era,” Phil Mahoney, executive vice chairman for Newmark Knight Frank, who has represented Jay Paul in transactions for decades, said in an interview Tuesday. “It will add to the Jay Paul ecosystem of downtown really in an accretive way.”

Mahoney declined to reveal the price the 18-story building at 50 West San Fernando is expected to command when it officially trades hands, likely in the next 30 days. But industry insiders with knowledge of the deal say the transaction has gone “nonrefundable,” meaning Jay Paul has already placed some money on the deal. Today the building is about 75 percent occupied, filled with prominent tenants like Accenture, Silicon Valley Capital Club and broadcasting company KQED, which has its call letters displayed at the top of the building.

The rumored price, confirmed by several sources with knowledge of the negotiations, sits around $235 million, or $640 per square foot for the 367,000-square-foot tower. That’s far above the current $544.31 price per square foot record in San Jose’s downtown when it comes to office building sales.

San Francisco-based DivcoWest and Boston-based Rockpoint Group purchased the building in December 2015 for $165.5 million, or about $493 per square foot. A representative for DivcoWest declined to comment on the pending sale Tuesday.

But the estimated price for the building doesn’t come as a shock to most industry onlookers. The KQED tower has long been considered the premier office building in the city, according to Mark Ritchie, president of San Jose-based real estate brokerage Ritchie Commercial.

At the same time, investor interest in the city has grown significantly, said Rick Jensen, communications director for the San Jose Downtown Association.

“Downtown San Jose is closer to realizing its potential more than ever, and others are realizing the potential is here now and that it’s time to invest,” he said. “Some of the bigger players are coming down here and Jay Paul is one of them.”

Indeed San Francisco-based Jay Paul Co. is considered a top player in the market, though the group entered the downtown San Jose real estate scene less than a year ago, when it unexpectedly swooped in last July to buy the city block-sized CityView Plaza across the street from 50 West for $283.5 million.

Immediately, rumors swirled around what Jay Paul Co. — the developer behind many of the offices and campuses that the biggest tech titans in the world lease today — would do with the aging property.

In April, Jay Paul Co. unveiled a plan to build 3.4 million square feet of office space in place of the existing 600,000-square-foot mixed-use CityView campus along San Jose’s prominent Market Street. Tenants in the campus have already started moving out of the existing buildings.

“That’s something that I don’t know you can find almost anywhere, where you have 600,000 square feet of leases you are trying to get terminated,” Ritchie added. “The size of the building they’re trying to drop in there — that tells you how large the forces are that are trying to come here.”

Jay Paul last year also bought the former Lincoln Law building at 1 North First St. for $46 million, signaling a broader interest in the growing downtown San Jose market where tech giants like Google and Adobe are making plans to grow significantly and real estate investors from around the world have picked up steam in scouting deals.

News that Jay Paul now plans to purchase 50 West may be a sign its interest in downtown San Jose real estate hasn’t yet been satiated. Industry insiders say the company has shown interest in several other properties near CityView Plaza and in other parts of the urban core.

So far Jay Paul Co. has spent nearly $330 million on real estate in the area, but once its newest purchase of the 50 West building closes, that number is set to shoot up to about $574 million.

“What he is doing is as bold as it gets,” Ritchie said of Jay Paul, owner and namesake of Jay Paul Co. “The money that he is committing [to downtown San Jose] is just a towering amount.”