Boyd Watterson Buys Fresno Office Asset for $99MM

Boyd Watterson Fresno 855 M Street Penstar Group JLL Internal Revenue Service IRS Employment Development Department

By Jon Peterson

Cleveland-based Boyd Watterson has acquired the 274,700 square foot office building in downtown Fresno known as 855 M Street. The purchase price on the transactions was $99 million, according to sources aware of the sale.

The seller of the property was Fresno-based Penstar Group. It was represented in the transactions by the San Francisco office of JLL. Those working on the sale included Adam Lasoff, managing director, and Jake Wagner, director. JLL declined to comment when contacted for this story.

The sales price on 855 M Street on a per square foot basis reflects the price point difference of Fresno versus other major markets in Northern California. This property traded at $360 per square foot. According to industry sources, a similar property in Sacramento would have traded around $500 per square foot and over $1,000 per square foot if it was in San Francisco.

855 M has a current occupancy of 92.2 percent. This doesn’t come as a surprise, since the property has a history of strong occupancy from the time it was built in 2003. Around 83 percent of the current space is leased to investment grade tenants. The anchor tenant in the property is the Internal Revenue Service, who has been in the building for 18 years. It has a lease for 156,609 square feet that represents 57 percent of the net rentable area of the property. Its lease does not expire until October of 2036.

Other significant tenants in the building include the Employment Development Department for the State of California, the Department of Veteran Affairs and the Department of Homeland Security. The office building is an 11-story property.

The Fresno office market remains fairly tight. According to information sourced by JLL, the vacancy in the market is now at 7.4 percent. There are 2,263 buildings in the market totaling 28.2 million square feet. The rental rate growth over the past 12 months has been around 1 percent. There is currently 167,000 square feet of new office space under construction.

Boyd Watterson’s real estate group was formed in 2009, and it serves as the asset manager for a number of institutional investors and managers in excess of $7.6 billion in gross real estate assets as of June 2021. It looks to acquire a mixture of office, industrial and flex assets that are leased to high credit quality tenants, according to its website. The company invests for separate accounts and private open-ended commingled funds.