Santa Barbara, California – Published 3/7/2014
Pacific Coast Business Times
Pacific Coast Business Times: Investor snaps up Sonos R&D facility in largest deal in 7 years
By Marlize van Romburgh, Staff Writer
|The 47,000-square-foot property at 25 E. Mason St. in Santa Barbara has been sold for a reported $17.5 million, marking the largest office and R&D property deals in the city in seven years. The entire building is leased for 10 years by music equipment maker Sonos. (Alex Drysdale / Business TImes photo)
A 47,000-square-foot property in Santa Barbara that music equipment maker Sonos leases for its world research and development headquarters has been sold for a reported $17.2 million after being listed for $21.5 million.
Radius Commercial Real Estate & Investments, which represented the buyer in the deal, said the sale of the 25 E. Mason St. building marks the largest transaction involving office and R&D property in Santa Barbara since 2007, when the El Paseo building at 820 State St. changed hands for more than $25 million.
The Mason Street property is the corporate R&D headquarters for Sonos, which makes high-end wireless equipment for audiophiles. The firm occupies the entire building and holds a 10-year lease on the property with two 5-year options to extend. Sonos plans to make “significant improvements” to the property, said Austin Herlihy, a commercial real estate broker with Radius who represented the buyer in the deal.
The building was purchased on Feb. 26 by an entity called USA San Diego, county property records show. Herlihy declined to give more information on the buyer, but said “it is a local investor.” The transfer value — the sale amount used for tax purposes — was $17.2 million, according to property records.
The building’s location next to the Entrada Hotel project on State Street was a major attraction for the buyer, Herlihy said. After changing hands multiple times, the long-vacant hotel project was purchased by Los Angeles hotel developer Michael Rosenfeld in 2010 and brought out of dormancy. The developer is slated to resume construction on the hotel in June.
Herlihy and Steve Brown represented the buyer in the all-cash exchange deal. Studley Retail out of Los Angeles was the listing company.
The building previously changed hands in January 2012, with East Mason SB LLC paying $9 million, records show. That company is headed up by Brian Kelly, a well-known South Coast real estate investor and the owner of The Hanger, a private car collector’s storage facility in Santa Barbara.
Kelly has bought a number of commercial properties in Santa Barbara’s Funk Zone — the waterfront area on either side of lower State Street that is filled with industrial properties, wineries and art galleries and home to Entrada — during the real estate downturn. After repositioning them, he sold three high-profile properties there last year for more than $20 million, turning a handsome profit. “He’s a very smart guy,” Herlihy said.
After buying the Mason Street property at the bottom of the market, Kelly brought Sonos on as a tenant last year, Herlihy said.
The Sonos lease makes the property all the more valuable. “For one, they’re growing like crazy,” he said. “Two, they are willing to sacrifice a lot to be a tenant in downtown Santa Barbara. Three, this is going to be more of an R&D type facility that [Sonos is] actually going to be putting a lot of money into.”
Sonos is downtown Santa Barbara’s largest private-sector tenant, with its corporate operations spread across four buildings. The company has about 270 employees in the city, Sonos executive Ingvar Meijers, who heads the firm’s global facilities team, told the Business Times in January. “We keep on growing,” Meijers said.
Amid an expansion streak, the company last year signed leases totaling 100,000 square feet and collectively valued at more than $21 million for space at 419 State St., 614 Chapala St., 820 State St. and 25 E. Mason St., according to Hayes Commercial Group.