CBRE buys Shorenstein’s Oakland City Center for $360m

CB Richard Ellis Investors has acquired a 1.6 million-square-foot portfolio of five properties in Oakland, California for just shy of $360 million.

The Los Angeles-based firm spent the past three months negotiating to buy five office and retail properties, as well as a 1,150-space parking garage, for its $2.1 billion value-added vehicle, CBRE Strategic Partners US Value 5 fund. The fund is now roughly 50 percent invested.

Mike Kane, senior director, said the deal gave CBRE Investors “critical mass” in the privately-owned Oakland City Center development. “This was a great chance for us to invest in the type of market we want to buy into,” he said in an interview.

Kane declined to identify the seller or the price, but according to other sources and data provider Real Capital Analytics, a joint venture between Shorenstein Properties and the State Teachers' Retirement System of Ohio sold the portfolio to CBRE Investors for just shy of $360 million after originally refinancing the first mortgage for $150 million in May 2005.

CBRE Investors said in a statement it had acquired the high-rise office properties 1111 Broadway and 555 12th Street, along with 1300 Clay Street, 505 14th Street and the plaza City Square, comprising more than 1.5 million-square-feet of office space and 55,000-square-feet of retail space. The parking garage is known as City Center garage.

Kane said the City Center development was a transportation hub for the East Bay area, with the firm expecting to see “a lot of turnover opportunity” in relation to tenancies. CBRE Investors’ Value 5 Fund is targeting office, multifamily and industrial assets in major cities in the US, through direct acquisitions and recapitalisations.

Kane added that US real estate deal flow was starting to increase from the troughs witnessed in 2009, but didn’t expect volumes to rise above their “current pace” for the next 12 months.

City Center in Oakland was first developed in the 1970s after the city acquired a large swathe of apartment buildings to make way for an enclosed shopping mall, high-rise office buildings, hotel, and parking structure. Over the course of two decades the project stalled, was restarted and redesigned with Shorenstein buying the project and development rights in December 1996 through its third real estate fund. Sources said the deal was one of two major assets in the vehicle. Two years later Shorenstein sold a 50 percent interest in the project to Ohio STRS.

Shorenstein developed 555 12th Street in 2002, and in November last year said the property was the first building in the firm’s commercial real estate portfolio to become LEED gold certified.