SAN DIEGO– KBS, one of the largest investors in commercial real estate, announced today that the company assisted in the acquisition of Sorrento Towers, a 296,327 square-foot Class A office complex in the heart of Sorrento Mesa, San Diego, California’s life science and technology marketplace. The property was acquired from real estate investment company Shorenstein Properties for $146 million by Prime US REIT (PRIME), which trades on the Singapore Exchange Securities Trading Limits ticker as: OXMU. KBS serves as the U.S.-based asset manager for the portfolio, which included identifying and sourcing this asset on PRIME’s behalf. Sorrento Towers is a Class A property that consists of two seven-story office buildings situated atop a multi-level parking structure.
Sorrento Towers is one of three assets KBS has assisted PRIME in acquiring for its portfolio since listing on the Singapore Exchange in 2019. “At 98.2% occupancy, Sorrento Towers is one of the most sought-after properties in San Diego’s premier innovation hub and is within walking distance of over 60,000 square feet of high-quality retail amenities,” says Gio Cordoves, Western regional president for KBS. “Through this transaction, KBS has assisted PRIME in securing another opportunity to add value to this portfolio.”
The Sorrento Mesa submarket where Sorrento Towers is located is home to San Diego’s largest concentration of technology companies, including those in the life science, biotech and med-tech sectors, telecommunications, wireless applications and healthcare. Its location just east of Torrey Pines, University Town Center and University of California San Diego, and just south of Del Mar Heights is drawing in such global firms as Google, Apple and Qualcomm, which continue to expand their presence in San Diego. The region’s mild climate, desirable lifestyle, highly qualified and educated talent pool, respected universities and research institutions, and lower office rents relative to other coastal California markets is driving the market’s growth in digital technology-focused firms.
“Among the top 15 tech-centric markets, San Diego boasts the highest concentration of its population categorized as Millennials at 31.6%, securing a substantial workforce for the future. It also boasts the highest percentage of patent growth, recording an 84.4% increase in the last five years, making it highly innovative and a breeding ground for spin-off tech companies,” says Cordoves. “These factors position the office market for strong performance in the foreseeable future.”
Built in 1990, Sorrento Towers is a LEED Gold-certified state-of-the-art life science/office asset conveniently positioned just south and east of the I-5/I-805 interchange and accessible to I-15 and other major local roadways. The property is centrally located in the San Diego region with easy access to surrounding business centers, public transportation, and residential communities.
Shorenstein acquired the property in 2018 and increased occupancy to 98%. Over the last few years, the property underwent significant upgrades including state-of-the-art tenant improvements, updates to the common areas, a fully renovated open-air plaza, an upgraded fitness center, conference spaces, training center and collaborative meeting areas.
The Sorrento Mesa office market in particular is well-positioned for ongoing growth thanks to significant barriers to entry, according to Tim Helgeson, asset manager for Sorrento Towers and senior vice president of KBS.
“Soaring demand, limited supply, and increasing conversions from office to life science are causing office vacancy rates in Sorrento Mesa to drop significantly,” says Helgeson. “In fact, from Q4 2020 to Q1 2021, Class A office inventory in this submarket experienced a 3.5% reduction in direct office vacancy due solely to life science conversions. This makes best-in-class assets like Sorrento Towers increasingly in demand among office users in the market.”
“Sorrento Towers is a high-quality asset in a thriving tech submarket in one of the most coveted regions in the country,” says Helgeson. “Office tenants in the San Diego market are eager to occupy space at properties like Sorrento Towers that have so much to offer.”
Kevin Shannon, co-head of U.S. capital markets, Brunson Howard, executive managing director and Ken White, executive managing director at Newmark brokered the sales transaction.
“KBS has once again demonstrated its deep expertise in recognizing markets with solid fundamentals and acquiring assets in those markets that are positioned for strong performance,” says Shannon.
Attorneys Bruce Fischer, Tatyana Litovsky, Christine Fan and Howard Chu, and paralegal Amanda Kennedy, of global law firm Greenberg Traurig, LLP’s Orange County office represented PRIME as legal counsel in the acquisition.
“We were very pleased to represent KBS in this significant strategic transaction,” says Fischer, Greenberg Traurig’s Chair of the West Coast Real Estate Practice and Co-Managing Shareholder of the Orange County office, who led the Greenberg Traurig team and represented KBS.
Sorrento Towers is located at 5355 and 5375 Mira Sorrento Place in San Diego, California.
