UPDATED, 3:23 p.m., June 22: Regent Properties is making a big bet on the return of office workers in San Diego, a city with office vacancy levels that just hit a nine-year high.
The Los Angeles-based real estate investment firm bought a 1.5-million-square-foot, four-building office portfolio in Downtown San Diego for $420 million, the company said in a release on Tuesday. The buildings are located at 401 West A Street, 701 B Street, 1230 Columbia Street and 707 Broadway.
“We’re contrarian,” Regent Properties CEO Eric Fleiss told The Real Deal. “We think now is a great time to be buying office properties.”
Fleiss said the buildings are currently 68 percent occupied. The purchases come at a rough time for the office sector, which still hasn’t bounced back — and might not until 2024 — after the coronavirus crisis drove workers out of offices.
Regent has been looking to buy office buildings in San Diego for the last five years. Once Fleiss found the buildings before the pandemic, he wasn’t going to give up on the deal. After negotiations with the seller, Fleiss decided to go through with the deal, even though the pandemic crushed office occupancy rates.
Emmes Group of Companies previously owned the buildings, records show. The firm acquired them for a total of $325 million between 2012 and 2014.
Though Emmes had renovated common areas, including lobbies and outdoor space, Regent is now planning to spend $60 million to add new fitness and conference centers, outdoor terraces and food and beverage space, the company said.
Founded in 1989, Regent owns buildings across six Western U.S. states and Texas. In California, it owns 22 properties — a mix of offices, residential complexes and other mixed-use developments.
The San Diego properties aren’t the only office purchases Regent is hoping to make. The firm is on a buying spree, looking to make $2 billion in commercial acquisitions over the next two years, across major cities in the Sun Belt region, Fleiss added.
Update: This story has been updated to include comments from Eric Fleiss.