Accelerated Office Deal Closing Marks Second-Largest San Diego Property Trade of 2021

Lou Hirsch

December 3, 2021

Canada-Based REIT Sells Sorrento Mesa Life Science Buildings for $576 Million

Canadian investor City Office REIT sped up the closing on a previously announced $576 million sale of Sorrento Mesa life sciences office buildings, making it the second-largest commercial deal to close this year in the San Diego region.

Based in Vancouver, British Columbia, the real estate investment trust announced in August that it was selling eight life sciences office properties to buyers later disclosed as Chicago-based Sterling Bay and Harrison Street. City Office REIT initially said the sale of six of the buildings was set to close in December at a price of $395 million, with the sale of the remaining two expected to close in February 2023 at $181 million.

Properties in the original December closing are at 10390, 10394, 10398, 10421 and 10445 Pacific Center Court in the Pacific Corporate Center campus and 5910 Pacific Center Blvd. Those initially set for the later closing are at 5975 Pacific Mesa Court, currently in development and set for a 2023 completion, and an existing building at 9985 Pacific Heights Blvd.

The REIT subsequently moved up the latter closing “to correspond with potential acquisition opportunities,” according to a November filing with the U.S. Securities and Exchange Commission.
In a Dec. 2 statement marking the full deal’s close, City Office REIT officials said the company expects net proceeds of $548 million after closing and other transaction costs, locking in a gain of more than $424 million after its 2017 purchase of the San Diego properties.

“We are positioned to redeploy these funds into premier office properties across some of the best markets in the country,” said City Office REIT CEO James Farrar in the statement, adding the company is “advancing three separate acquisitions” in Dallas; Phoenix; and Raleigh, North Carolina, with a total price of approximately $613.5 million. Closings are pending and specific locations were not disclosed.
CoStar data shows that at $576 million the Sorrento Mesa transaction is the San Diego region’s second-largest property deal of 2021 by total price. The largest was the $1.45 billion deal in which Blackstone Group and TruAmerica acquired the 64-property apartment portfolio of the locally based Conrad Prebys Foundation, the largest multifamily sale in San Diego’s history.