Phase 3 Real Estate Acquires San Mateo Office for $168M

The Class A, 383,123-square-foot office asset was converted to target life science tenants in 2016.

DC Station. Photo courtesy of Harvest Properties

A partnership between Harvest Properties and Cerberus Capital Management has sold DC Station, a 383,123-square-foot office building in the San Francisco suburb of Daly City, Calif., along with an adjacent seven-level parking garage. Phase 3 Real Estate Partners acquired the property for $168 million, CommercialEdge data shows.

The Harvest-Cerberus joint venture initially bought DC Station in 2018 for $114.5 million. Blackstone had financed the transaction.

The nine-story, Class A office building is located at 2001 Junipero Serra Blvd. DC Station is situated just off Interstate 280 and is adjacent to the Daly City BART Station.

Floorplates average 43,855 square feet. Originally constructed in 2001, the building was renovated in 2016 to cater to life science users. Those capital improvements also included the addition of a double-height lobby, upgrades to the common area and fitness center, as well as a new conference facility. Other amenities include an EV charging station and more than 1,700 parking spaces. DC Station received LEED Gold certification in 2019, according to the U.S. Green Building Council. The building is also Energy Star certified.

The largest tenant at DC Station is health-care software firm Genesys, which occupies some 156,000 square feet. Other tenants include Kaiser Permanente and Satellite Healthcare. The asset was more than 90 percent leased at the beginning of last year, up from 70 percent at the time of the 2018 sale, according to a statement from the seller.

Thriving life sciences market

The Bay Area life sciences sector has experienced significant growth over the past year, running contrary to the wider office sector. In the first quarter, gross absorption within the market totaled 1.6 million square feet, according to a Kidder Mathews report. Most of this—nearly 1.1 million square feet—was in San Mateo County, which had close to half a million square feet of positive net absorption. Vacancies in the county reached 4.5 percent.

New development is ongoing across the Bay Area, with a total of 3.7 million square feet underway. Earlier this month, Phase 3 Real Estate joined forces with Bain Capital Real Estate to secure $400 million in construction financing for Marina Genesis, a 570,000-square-foot life science campus currently underway in nearby Brisbane.

In addition to ground-up projects, developers are also opting for strategic conversions of traditional office assets for life science use. Longfellow Real Estate Partners’ recent $156 million acquisition of San Mateo Bay Center is an example of this: The new owner plans to fully reposition the 250,000-square-foot campus.

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