Concord tower real estate deal underscores office market frailty

Concord tower real estate deal underscores office market frailty

CONCORD — A downtown Concord tower and adjacent parking garage have been bought in a real estate deal that underscores the frailty of the Bay Area office market.

The office complex and garage, known as One Concord Center, were bought for roughly half of their prior sale price, which occurred in 2017, according to documents filed on Aug. 21 at the Contra Costa County Recorder’s Office.

The new owner, One Concord Towers, paid $40.5 million for the office complex, which is near the Concord BART station in the East Bay city’s downtown district, the county real estate records show.

The buying entity is an LLC managed by real estate entrepreneurs Leonard Epstein and Phil Tagami, state business records show. Tagami is the chief executive officer and Epstein is the chief financial officer of California Capital & Investment Group, a real estate company.

The $40.5 million purchasing amount includes a core price of $38.2 million plus an assumption by the buyer of roughly another $2 million to $3 million in liabilities and debts. The buying entity received a discount on the price because it assumed certain liabilities, according to Epstein.

The buyer also landed $35.5 million in financing at the time of the One Concord Center purchase, the county documents show. The lender was Delphi CRE Funding, which is managed by Acore Capital Mortgage.

At an overall purchase package of $40.5 million, that value is 42.6% below the $70.5 million the sellers paid for the property in 2017, a review of the county records shows.

“Office building prices are at the bottom and they are going to stay that way for a couple of years,” said Jeffrey Weil, an executive vice president with Colliers, a commercial real estate firm.

Since the outbreak of the coronavirus and subsequent government-imposed business shutdowns in March 2020, multiple factors have coalesced to produce a Bay Area office market that now suffers from an array of economic maladies.

The wide-ranging shutdowns that included offices prompted numerous people to work from home. Even after the effects and ailments of the virus faded, workers have been reluctant to return to the office.

That, in turn, dramatically reduced the demand for office space and caused vacancy levels to skyrocket throughout the Bay Area.

California Capital & Investment is managing multiple funds on behalf of investors who seek attractive commercial real estate properties to buy in Contra Costa County, according to Epstein.

In 2022, the real estate firm’s affiliates bought two other office properties. The purchases were, according to Contra Costa County real estate records:

— Walnut Creek Executive Park in Walnut Creek for $49.6 million.

— The Terraces in Pleasant Hill for $38.5 million.

“We feel it’s an opportunistic time to buy office properties based on current market conditions,” Epstein said.

The 15-story One Concord Center building totals 369,000 square feet and is about 54% occupied, Epstein estimated.

“We will renovate it as needed and will lease it up,” Epstein said.

Weil believes the One Concord Center complex is one of the top-notch office buildings in the East Bay, both from the standpoint of location and the structure itself.

Overall, however, the lack of demand for office space means building owners face plenty of challenges to land tenants for their Bay Area office properties.

“The office market is going to struggle for the next couple of years,” Weil said.