Santa Barbara-based music-gear maker Sonos is booming. And as business has grown, the company has also cranked up its leasing.
Sonos is now the only company in downtown Santa Barbara that occupies more than 100,000 square feet of space. The company signed leases collectively valued at more than $21 million in 2013, according to Hayes Commercial Group, and is now downtown Santa Barbara’s largest private-sector tenant.
Sonos executive Ingvar Meijers, who heads the firm’s global facilities team, told me that even as the privately held firm has expanded around the world, it has deepened its commitment to the South Coast. “People really enjoy being downtown and enjoy the urban lifestyle that comes with it,” he said. “We believe it’s kind of part of our culture.”
Sonos’ employees enjoy the perks of being able to walk to restaurants, stores and coffee shops and catch a breath of fresh air when they travel between the firm’s spread-out offices, he said. The company even has bicycles for those workers who prefer to pedal between its buildings.
Sonos currently has about 270 employees in town. About two years ago, it had about 100. “We keep on growing,” Meijers said.
Hayes Commercial said it was approached by Sonos in late 2012. The music gear maker predicted that it would need a lot more space in 2013 to house its growing corporate operations and tasked Hayes broker Greg Bartholomew with finding the right places. The only catch? Sonos needed 100,000 square feet of R&D and office space and wanted it right in Santa Barbara’s tight-knit downtown.
“The requirement was unprecedented — there is no instance in memory of a private-sector tenant seeking space of that magnitude in the heart of downtown,” Hayes said in a statement. “To put this challenge in perspective, here is a snapshot of the downtown leasing market at the end of 2012. There were just four office spaces larger than 10,000 square feet available for lease, only one of which was suitable for Sonos. For R&D use, there were only four industrial spaces available for lease of any size, totaling 19,000 square feet.”
According to Hayes, Bartholomew scoured the downtown area and met with property owners to find available spaces that weren’t on the market.
By mid-year, Sonos had found four spaces totaling the square footage it needed: 25 E. Mason St. (46,790 square feet), 419 State St. (27,773 square feet), 614 Chapala St. (22,000 square feet) and 820 State St. (8,474 square feet). The first three properties were not on the market, Hayes noted.
Winning 1031 deal
Kudos to Radius Commercial Real Estate & Investments Principal Steve Golis, who was recently honored with the Santa Barbara Association of Realtors’ Jack Kelly Award for performing last year’s most challenging 1031 exchange. Golis was recognized for a deal involving the retail space at 1711 S. Broadway in Santa Maria. The transaction closed in September.
A so-called 1031 exchange is a strategy employed by many real estate investors to defer capital gains taxes by selling one property and then acquiring another similar property within a specific timeframe.
Golis, along with Brian Johnson and Jon Standring at Radius, previously represented the joint sellers of a 63-unit apartment complex in Isla Vista, a deal that closed in June 2013 for $14.3 million. Each owner held a 50 percent stake in the property, and the Radius agents were asked to find separate replacement properties and perform independent exchanges, the firm said.
For one of the clients, they found a viable property in Santa Maria valued at more than $7 million. After helping the seller untangle from an issue with an existing loan defeasance and negotiating the price down, Golis’ next hurdle was the purchase loan. Radius noted that its client had only 25 percent to put down and finding a lender willing to finance the rest was tricky, but Golis reportedly worked his pool of contacts and found one.
Oh, and just to make matters a little more complicated? The buyer lives in Russia. “The whole transaction was handled with an 11-hour time difference,” Golis said in a statement. But “ultimately, both clients ended up getting out of a non-cash-flowing asset and into properties that deliver a double-digit return.”
DEAL OF THE WEEK:
• Rexford Industrial Realty recently purchased the 199,370-square-foot industrial and office property at 2900-2950 Madera Road in Simi Valley for $15.8 million.
The Los Angeles firm said it purchased the buildings from an owner-occupant and performed a long-term sale-leaseback of the industrial portion. The 16.3-acre project includes an industrial building that spans 136,065 square feet and a two-story office building that spans 63,305 square feet. The industrial building is 100 percent leased to Kingsbridge International for 10 years, Rexford said. The office building is being marketed for sale or lease.
• Contact Marlize van Romburgh at [email protected]