By Jon Peterson
Commercial properties with full occupancy may be the only ones that get a serious look from investors nowadays. This may be one of the reasons Santa Monica-based BH Properties has chosen to put up for sale the 57,246 square-foot office building in Redlands known as Redlands Corporate Plaza located at 1980 Orange Tree Lane. The asking price for the property is $11.2 million or $195 per square foot, as stated in the asset’s offering document.
The current owner has held title to the property for almost ten years, according to public records. BH purchased the 1989 vintage property in February 2013.
The owners are working on marketing the asset with CBRE’s Ontario and Newport Beach offices. Part of the team working on the transaction includes Sammy Cemo, a first vice president in the Ontario office, and Anthony DeLorenzo, a vice chairman in the Newport Beach office. CBRE did not respond to a phone call seeking comment for this story.
BH Properties is a 30-year-old commercial real estate investment firm that owns, operates and re-positions value-add real estate across the country, according to the company’s website. The firm focuses on underperforming office, industrial, retail and multi-family properties, seeking out properties with excessive vacancy or otherwise in need of a new vision.
If the sale on the property reaches the asking price, the transaction will produce a 6.59 percent cap rate, according to the offering document. This yield would be based on the property’s current net operating income.
The office building currently has no vacancies, and it is leased to 10 tenants, which occupy space ranging from 2,054 to 16,001 square feet. There will be room for the new property owner to add some value in the future by bringing rents up to market levels once leases expire. The current rents in the property are, on average, just over five percent below market, according to the marketing document.
The property’s largest tenant, Epic Management, occupies roughly 16,000 square feet, which amounts to nearly 28 percent of the total space in the building. This tenant’s lease expires in March, and it has a five-year renewal option built into the lease agreement, providing a mark-to-market opportunity.
In addition, there could soon be increased demand for office space in the City of Redlands. The municipality acquired an office building at 300 East State Street for $16 million, and it plans to use the property for its space requirements for City Hall and Police Station. The tenants that were in this building will likely need new space.
Redlands Corporate Plaza was first developed in 1989. It is a two-story building with a total of 300 surface parking spaces available to the tenants in the property. The parcel of land measures 3.82 acres.
During the pandemic, the Redlands office market has held its own from an occupancy standpoint. The vacancy in the submarket is 7.3 percent, according to data compiled by CBRE. This performance ties the City for the lowest amount of vacancy across Inland Empire submarkets with at least one million square feet of commercial space.