Basin Street Properties has made a big expansion to its holdings of commercial property in Sonoma and Marin counties, buying seven Santa Rosa office buildings from a real estate investor and developer known for some of the area’s more prominent buildings.
Reno-based Basin Street’s Santa Rosa portfolio now exceeds 1 million square feet with the purchase of 337,360 square feet of space from Simons & Woodard. Architect Larry Simons, who turns 80 in May, has been designing and developing Sonoma County buildings for five decades.
The purchase price wasn't disclosed.
“Simons & Woodard will be no more after we’re finished wrapping up things,” said Joan Woodard, president and CEO, on Feb. 1. Improvement in the office market and leasing up the buildings made this the right time for the transition, she said.
The company has two remaining building-management contracts, the 2235 Mercury Way building developed for brief full-building tenant Nokia and Fountaingrove Medical Building at 3536 Mendocino Ave. Simons & Woodard is working with the Mercury Way owner on future management, possibly with Basin Street, and the Fountaingrove building owner wants to sell it.
“We have always admired Simons and Woodard’s work, and we believe these buildings with their lasting appeal and attractive locations are a great fit for Basin Street Properties’ portfolio,” said Matt White, CEO of Basin Street Properties. “We also recognize that Santa Rosa continues to prosper and grow and is an exceptional place to live, work and be invested.”
Six of the buildings in the latest sale are in west Santa Rosa, located in the Stony Point Lakes development at 70, 100, 110 and 120 Stony Point Road, 131 Stony Circle (buildings A and B). The seventh is at 3333 Mendocino Ave.
The newly acquired properties are nearly 90 percent leased. Tenancies include regional offices for Farmers Insurance, Sutter Health, National Instruments, Kaiser Permanente and US Bank.
“Developing and managing these buildings with their wonderful tenants has been a labor of love for us,” Woodard said in a statement. “We have weighed this decision for some time and finding the right buyer that will care for these buildings and its tenants with the same commitment and level of quality that we do was very important to us.”
Basin Street now has 13 projects in the Santa Rosa area, plus properties in Petaluma and Marin County.
“We believe these properties offer an excellent business environment with quality on-site amenities and additional offsite restaurants and services nearby,” said Matt White. “Simons & Woodard developed first-rate buildings and established a great business setting in the Stony Point submarket. We intend to be mindful stewards of that legacy.”
Basin Street plans on some updates to lobbies, common areas and landscaping that complement the architecture and features of the buildings.
“We think the future is bright for Santa Rosa and we look forward to continuing to help the region grow and prosper,” said Matt White. “We will continue to seek out opportunities in Santa Rosa and our team is well suited to capitalize on these for both our investors and our tenants.”
Availability of Santa Rosa office space has been dwindling gradually. The office space vacancy rate in Santa Rosa was 13.4 percent of 7.2 million square feet at the end of last year, according to Keegan & Coppin Co. Inc./ONCOR International. That’s down from 15.6 percent at the end of 2015, after 147,000 square feet of net absorption of space over 12 months. The city’s rate was 16.4 percent at year-end 2014 and 18.2 percent 2013.
Leasing up Santa Rosa properties has been a decadelong challenge, Woodard said. A number of office and industrial buildings changed hands in Santa Rosa and Petaluma just after the great recession, as mortgages obtained at the peak of the market became unsustainable as vacancies mounted.
“While occupancy is back up, we do not have the rents back,” she said. “There is still the impact of competing properties that were picked up for pennies on the dollar, so they were offered at lower rents.”
Attracting and keeping tenants in the past four years has been about maintaining “constancy of care” even as finances get stretched, Woodard said. That means keeping up maintenance and responding to tenant requests.
Simons started an architecture firm in 1966, and his work includes Fountaingrove Inn and Equus Restaurant, Northpoint Corporate Center in southwest Santa Rosa and the senior wing at Finley Community Center. The company expanded to include development and property management services, including the creation three decades ago of Stony Point Executive Offices.
The executive offices business, which has grown to 15,291 rentable square feet and 98 percent occupancy, will need a new operator or will be closed down, Woodard said.
“Sometimes when you come out of recessionary periods, executive office space is more popular than ever,” she said.
Services there range from full-time offices for very small businesses, some operating there for three decades, to “image packages” that provide a phone number, receptionist and mailing address.
The operation has tried to bridge the gap between co-work facilities such as WeWork and national operators of temporary office space such as Regus, which came to Petaluma a decade ago and Santa Rosa a few years back.
Last month, Simons & Woodard turned over management of development property in Northpoint Corporate Center now owned by the lender, Exchange Bank.
Woodard joined the firm in 2000 after the death of Simons’ longtime business partner Jim Brecht. Simons & Brecht had more than 100 employees at its peak activity. The staff has been about 14 for the past five years, with two licensed architects, two property managers and other staff. Some are retiring or joining family businesses, and others are shifting employment to Basin Street Properties, Woodard said.
Woodard plans to move to Idaho after the business winds down.