Downtown offices sold for $73.5M: DivcoWest buys 101 S. Ellsworth Ave., a fully-leased San Mateo property

It closed on the downtown office space earlier this month, paying $835 a square foot for the fully leased property.

In a press release, Divco highlighted its interest calling the centrally located downtown Class A office building a “best-in-class asset.”

“Situated just one block from downtown San Mateo’s Caltrain station, the 88,000-square-foot, six-story building sits in a walkable neighborhood surrounded by many retail and restaurant amenities. Close proximity to Caltrain service and easy access to several freeways puts employees of tenants in the building just 25 minutes from San Francisco and residential locations throughout Silicon Valley,” the company said in the release.

The property has a stronghold of tenants and has averaged 99 percent occupancy over the last 10 years, according to the company. Current tenants include United American Bank, Merrill Lynch, Acacia Capital Corporation and Jump. It’s also one of the few large Class A office buildings in downtown, according to Divco.

Following its acquisition, the company is expected to bring the rents up to market rate as it’s time to negotiate tenant leases.

San Mateo officials and developers have long noted the shortage of larger office spaces in the bustling downtown where various startups have ventured. The limited stock has prompted developers to propose new projects, including on the periphery of the city’s main business district such as along El Camino Real and Claremont Street.

So far this year, downtown San Mateo’s office space has hovered around 6 percent vacancy rate, with a slight uptick last month, according to data from Colliers International. The average asking rents have been a little over $5 a square foot, with a slight dip in March from the month before, according to Colliers.

Divco may have taken note of its recent success in the San Mateo office market in deciding to buy the Ellsworth Avenue building.

Last month, Divco sold a three-building office complex at 700-900 Concar Drive for $179.5 million, according to documents filed with the county. Rakuten, a Japanese e-commerce company and also one of the tenants, bought the site totally nearly 210,000 square feet of Class A office space.

Divco had acquired the property that’s also home to a Salesforce office overlooking Highway 101 near the State Route 92 intersection, in February 2015 for $130.5 million. That’s an almost $50 million or 38 percent increase in valuation after just two years.

Divco’s initial 2015 purchase raised the property valuation to $619 per square foot, and its sale last month to Rakuten went for $854 per square foot.

That area near the Hayward Park Caltrain station is about to host another nearly 300,000 square feet of new Class A office spaces as Hines finishes its 400-450 Concar Drive office buildings.

The city also benefits from the property sales as San Mateo has its own property transfer tax. More than $1.5 million will go to the city from the 2015 and 2017 sales of the 700-900 Concar Drive buildings. Divco’s recent purchase of 101 S. Ellsworth will also contribute another $367,500 to the city.

With the recent action, Divco appears to remain confident in the Peninsula’s red-hot real estate market. The investment company was extremely active during a six-month period leading up to its purchase of the Concar site. In late 2014, it purchased 450,000 square feet of office space at 1400-1500 Seaport Blvd. in Redwood City; and followed with acquiring the 111,500-square-foot Century Plaza at 1065 E. Hillsdale in Foster City.

It also oversees commercial properties in South San Francisco, Menlo Park, Palo Alto and other Bay Area cities, according to its website.

samantha@smdailyjournal.com

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