CIM Lands First Tenant for 2100 Franklin

OAKLAND, CA-CIM Group has landed its first tenant for 2100 Franklin. It acquired the new nine-story office building in Downtown’s Lake Merritt District in October 2008 along with four other Oakland buildings for $412.5 million. The tenant, biotech firm Cerexa Inc., will relocate to the top two floors of the 215,000-square-foot building in early 2009 from its current location in nearby Alameda, CA.

The lease totals 38,000 square feet. The length of the commitment and the lease rate were not immediately available. An executive with Cerexa did not immediately return a request for comment and CIM Group declined to comment on the specifics. The asking rate for class A space in Downtown Oakland ranges from $2.55- to $3.25 per square foot per month, fully serviced, according to Cornish & Carey’s third quarter market report.

Jeff Kreshek, principal for leasing from CIM says interest in the building may have been hurt by brokers and tenants thinking CIM, like Brandywine, wanted to lease all or a majority of the building to a single tenant. In truth, the company is entertaining leases as small as 5,000 square feet, he says.

“I think activity on the building was slow because at first Brandywine’s desire was to have an anchor tenant,” which deterred smaller tenants, Kreshek said. “After that, when [Brandywine] knew [it was] going to sell [it] may have though that doing nothing was better than doing something that would draw criticism.”

CIM did want to start with a lease that was big and meaningful, he says, but everybody has a different definition of what that would be. “For CIM, 38,000 square feet is a sizeable, meaningful deal for this building,” he says. “Now, brokers who maybe thought their tenant was too small know that is no longer the case.”

Based on interest, Kreshek says the general plan is to start multi-tenanting the lower floors, come from the top down with larger deals and meet in the middle. While not wanting to reveal the company’s expectations for rent or to speculate on the going market rate, Kreshek says deals for space in the building will be looked at individually based on the amount of space wanted, the length of commitment and the tenant’s credit rating, among other things.

“Keeping paper rates high and not doing any deals doesn’t work for us,” he says. “We are here to do deals today.”

CIM’s portfolio acquisition from Brandywine Realty Trust totaled 1.7 million square feet. The sale was first announced in July. The buildings are located in the Lake Merritt and City Center districts.

In addition to 2100 Franklin (215,000 square feet; nine stories; LEED-Gold), the acquired properties include One Kaiser Plaza (530,000 square feet; 28 stories; known as Ordway), 1901 Harrison St. (272,000 square feet; 16 stories), 1333 Broadway (238,000 square feet; 10 stories; above BART station), and 2101 Webster St. (475,000 square feet; 20 stories). As part of the deal, an affiliate of Brandywine has the managing and leasing assignment for the entire portfolio for an initial one-year period following the closing.

At the time of the sale, CIM told GlobeSt.com the portfolio’s availability was approximately 11%, not including 2100 Franklin, a $78.5-million ground-up development that was completed in fall 2007 and, while now 18% leased, remains unoccupied. With engineering firm DMJM Harris having recently signed on for 30,000-square-foot lease at 2101 Webster, that percentage could now be a couple of points higher.

CIM’s purchase from Brandywine included the assumption of existing mortgage loans on three of the properties (1333 Broadway, One Kaiser Plaza and 1901 Harrison) totaling $95.3 million, and a $40-million, interest-free loan secured by the first mortgage on 2100 Franklin and 2101 Webster. All four loans carry interest rates in the low-to-mid 5% range and come due in 2010, according to SEC filings.

Also as part of the deal, CIM Group was granted a 15-year option to purchase a land parcel adjacent to One Kaiser Plaza slated for the 650,000-sf Two Kaiser Plaza office building, and has committed to lease to CIM 150 parking spaces on that same parcel for tenants of the building.

The portfolio furthers CIM’s Oakland investment program, which was launched in June 2007 with the $66-million acquisition of the 484-room Oakland City Center Marriott and the 162-room Courtyard Oakland Downtown. The two assets are located adjacent to each other three blocks from the heart of Downtown Oakland.

As part of its focus on Oakland, CIM plans to relocate its office from 2 Embarcadero in San Francisco next year. The company has not yet announced a location but presumably will be occupying space in one of its newly acquired office buildings.

Brandywine continues to own three office properties in Northern California totaling 554,000 square feet as well as two land parcels. It also has additional third party property management contracts in the market.

Cerexa is focused on research and development of therapies for life-threatening infections. Currently housed at 1751 Harbor Bay Parkway in Alameda, the company began operations in 2005 and was acquired by Forest Laboratories in January 2007. The company was represented in its lease negotiations by Robert Tasker and Matthew Currie of CM Realty. CIM was represented by Kreshek and Mike Keeley of Brandywine.