Parallel Capital Partners Teams with Zell to Buy San Diego Office Campus for $73M

By Gail Kalinoski, Contributing Editor

Parallel Capital Partners has added to its holdings in the San Diego area with the acquisition of a three-building Class A office complex in the Sorrento Mesa submarket for $72.5 million. The firm purchased Wateridge Plaza in a joint venture with Equity Group Investments of Chicago, founded by Sam Zell, from Beacon Capital Partners and C-III Realty.

Beacon and C-III had invested more than $14 million in upgrades to the property from 2009 to 2013. Parallel also plans capital improvements at the site and has hired architectural firm Gensler and Glanz Signing & Graphics. The San Diego-based firm did not say how much it plans to spend or outline the improvements.

The broker for the seller was Adam Edwards of Eastdil Secured.

Built in 1984, the campus has three five- and six-story buildings – 10201, 10221 and 10241 Wateridge Circle – totaling 278,787 square feet on eight acres. There is potential to build another 168,000 square feet of office space at the site. Amenities include a full-service bistro, fitness center, structured parking, volleyball and tennis courts, barbecues and hiking trails.

The complex currently has an occupancy rate of 72 percent. Tenants include American Specialty Health and Eddy M’s Bistro.

Matt Root, CEO of Parallel, said the acquisition is part of the firm’s strategy of acquiring irreplaceable, value-added commercial real estate in key Western markets.

“Wateridge Plaza is the ideal address for companies seeking the highest profile location, unparalleled campus amenities, panoramic canyon views and superb freeway access,” Root said in a news release. “Most importantly it expands our presence in the Sorrento Mesa area, a technology and life science corridor which we believe is an emerging hub in the San Diego office sector. Home to global leaders such as Qualcomm, Carefusion and NuVasive, Sorrento Mesa is rapidly evolving into a world-class life science and tech cluster.”

Root and the other two principals of Parallel, Jim Ingebritsen and Jim Reynolds, have a successful history in the Sorrento Mesa submarket. In 2002, they acquired Seaview Corporate Center for $65 million, and then sold it two years later to Principal Financial Group for $92.1 million, according to firm’s press release. The firm, a private real estate investment and operating company, re-acquired the property at the height of the financial crisis in 2009 for $75 million and sold it again two years later to John Hancock Real Estate for $109 million.

With this acquisition, Parallel now owns 13 office/industrial and R&D properties in the San Diego area with more than 748,853 square feet in the Sorrento Mesa/Sorrento Valley submarkets, including Sorrento Pines Business Park, Sorrento Business Complex and Sorrento Research and Development Park.

Sorrento Mesa was the leading submarket in San Diego County last year with 717,377 square feet of office space leased, according to Cassidy Turley’s San Diego Commercial Real Estate 2014 Forecast. The report noted that jobs grew in the region by about 2 percent last year and another 2 percent increase is predicted for 2014. Class A office vacancy is expected drop below the pre-recession level of 11.7 percent by the end of the year, the report added.

Parallel had a busy 2013, acquiring more than $400 million in assets for its portfolio last year. The firm purchased Urban Towers, an 850,000-square-foot, two-building Class A office property in Irving, Texas, in September. The dollar amount wasn’t released but Parallel made the acquisition with Angelo, Gordon & Co. The property in the Dallas-Fort Worth submarket of Las Colinas also has rights to build a third office building and parking garage. Earlier in 2013, Parallel acquired Bixby Office Park, a 297,000-square-foot complex in Seal Beach, Calif., for $85 million.