|The Bekins Moving & Storage Building, a four-story Funk Zone office building, has been sold to an undisclosed local investor.
(Steve Malone / News-Press
Santa Barbara, California – Published 3/5/2014
Santa Barbara News-Press
Santa Barbara News-Press: Historic Bekins building sold to local investor
By Steve Sinovic, News-Press Staff Writer
A historic downtown building that once housed Brooks Institute of Photography student photo studios, and now is leased by wireless audio manufacturer Sonos, has been sold to an unnamed local investor.
Terms of the deal were not disclosed, but the former Bekins Moving & Storage building at 25 E. Mason St. had been listed at $21.5 million, according to the commercial real estate brokers who worked on the transaction.
Radius Commercial Real Estate & Investments said the March 3 sale of the Funk Zone building marks the largest transaction involving office property in Santa Barbara since 2007, when the El Paseo building at 820 State St. changed hands for more than $25 million.
Austin Herlihy and Steve Brown of Radius represented the buyer in the all-cash exchange deal. Studley Retail of Los Angeles was the listing company.
The seller also was not identified, but is another South Coast resident, said Mr. Herlihy.
“Clearly, the new owner is drawn to the stable income stream,” he said of Sonos, which plans significant tenant improvements and holds a 10-year lease on the 47,000-square-foot property, a poured-concrete structure that was built in the early 1920s.
Eager for locations in or near downtown, many tech-oriented companies have chosen, when they can find them, to recycle old warehouses into modern uses.
A big part of these edgy firms’ motivation is their strong desire to be downtown, where all the action is, said Mr. Herlihy.
“There’s a shortage of vacancies overall in the downtown area, so these warehouses are attractive options,” he said. “When upgrades are made, they do high-quality improvements.”
The trend makes economic sense. Downtown’s office vacancy rate is about 2 percent, land costs are sky-high, there’s barely any vacant land left and renovating is cheaper and much faster than erecting a new building. With the South Coast facing growth constraints, experts say less and less new commercial and industrial development will occur.
According to Mr. Herlihy, several key features made the property an extremely attractive investment opportunity, but high on the list is its location directly adjacent to the up-and-coming Entrada Hotel project on State Street. The Entrada project sold in 2011 and is scheduled to commence construction in June. He and Mr. Brown were also a part of that deal.
“To purchase one of a handful of waterfront properties with ocean views in Santa Barbara, for about $400 per square foot, 100 percent leased for 10 years to one of Santa Barbara’s best tenants, and right next to the Entrada, one of the market’s most anticipated developments in recent years, is in my mind an incredible opportunity if not a steal,” he said.
“I have been bullish on this property for the past three years. I’m not sure any property in Santa Barbara has as much development upside and location upside.”
Founded in 2002, Sonos, which has about 300 local employees, will use the space for research and development of its wireless home music systems, said Mr. Herlihy.
As to why Sonos wasn’t interested in purchasing its soon-to-be digs in such an up-and-coming neighborhood, Mr. Herlihy said it probably didn’t make sense for the company to “park money in real estate” when it is working hard to establish market share in its industry.
Helping fund its growth is $135 million in venture capital money, which the company acquired in 2012. Sonos recently purchased a spendy 30-second commercial that aired during the Super Bowl.