The Shoreline Square office tower in Downtown Long Beach has a new occupant after the real estate advisory firm Newmark Group facilitated an $85.5 million leasehold sale of the property, the firm announced last week. The purchase was made by Shoreline Square Capital LLC from the building’s owner, Parallel Capital Partners.
Shoreline Square is a 20-story office building with 410,920 square feet, according to Newmark.
Parallel, for its part, purchased the site in 2014 for $101.7 million. But the 16% drop in price wasn’t a reflection of the building’s value, according to Newmark representative Alexa Nestleroad. Parallel bought the property outright in 2014, while Shoreline Square Capital made a leasehold purchase, meaning the firm owns the right to occupy and make changes to the building—which includes owning the building’s tenancies—but does not own the property itself.
“They are not comparable purchases,” Nestleroad said.
When Shoreline Square Capital’s purchase went through, 92% of the building’s space was leased, and 52% of tenants were government agencies including U.S. Customs and Border Protection, the California State Land Commission, the Department of Defense, the California Coastal Commission and the Bureau of Alcohol, Tobacco, Firearms and Explosives. These tenants have racked up an average of over 28 years committed to the building.
“The buyer was attracted to the numerous credit government tenancies in this asset and the attractive cash on cash returns produced by a favorable debt market as well as the substantial discount to replacement cost,” Newmark’s co-head of U.S. Capital Markets Kevin Shannon said in a statement.
According to Matt Root, CEO of Parallel Capital Partners, this sale represents the completion of a successful venture with the Shoreline Square Tower.
“We accomplished what we wanted with this property—including implementing multiple sustainability measures, attaining LEED gold status and renewing GSA’s Department of Homeland Security-Customs and Border Protection for 20 years—ultimately achieving a positive return on our investment,” Root said.
A part of Parallel’s success with Shoreline Square has been the development of the Long Beach Downtown area, which has come a long way since Parallel made its purchase eight years ago.
“Downtown Long Beach has seen over $2 billion in investment over the last decade and has a robust future commercial and residential development pipeline,” Newmark Senior Managing Director Laura Stumm said in a statement. “Corporations and government tenants alike have recognized the relative value that this market provides, as reflected by the tenure of the tenancy at Shoreline Square.”