Investors from Houston and Los Angeles have acquired the 17-building Tri-City Corporate Centre in San Bernardino in one of the largest office property deals in the Inland Empire.
The master-planned complex near the intersection of Interstate 10 and Interstate 215 contains more than 1 million square feet of office space on 153 acres. Terms of the sale were not disclosed, but industry observers familiar with the San Bernardino County market valued the deal at more than $100 million.
The buyer was a joint venture of private Texas real estate company Hines and publicly traded Los Angeles asset management firm Oaktree Capital Management. Two investment funds managed by Rancon Real Estate were the sellers.
Rancon, a Temecula developer, built Tri-City Corporate Centre over time, from 1986 through 2008. The transaction was the largest office sale by square footage in the history of the Inland Empire, according to brokerage CBRE Group Inc., which represented the sellers in the deal.
The Inland Empire office market was hit hard by the recession but is showing signs of improvement. Overall vacancy in San Bernardino was 20.2% in the fourth quarter of 2014, down from 23.3% in the same period the year before.
Tri-City Corporate Centre is 39% vacant, but the new owners expect occupancy to rise as they invest in the complex and the market improves
"We are thrilled for the opportunity to acquire the largest and highest-quality business park in the Inland Empire, which is projected to be the No. 5 rent-growth market in the country," said Doug Metzler, Hines' senior managing director. "This acquisition provides us the opportunity to add significant value through leasing and the continuing improvement of Inland Empire office market fundamentals."
The center is a mixed-use business park of low- and mid-rise buildings in a variety of architectural styles. It is served by a nearly 400,000-square-foot shopping mall with stores, restaurants, a bank and a fitness club. The mall was not included in the sale.
San Bernardino officials have approved the addition of more than 300,000 square feet of commercial real estate development on four parcels of adjacent land. Current tenants include medical transport firm Air Methods Corp., defense company Northrop Grumman and the Art Institute of California art school.
Office markets that are surrounded by vast residential neighborhoods such as the Inland Empire, Orange County and Phoenix are coming back to health as the nation's economic recovery grows more mature, real estate broker Kevin Shannon of CBRE said.
In the Inland Empire, "the industrial market is on fire and the office market is clearly improving," Shannon said.