Kearny Mesa Sale Execution Amid Complex Lease Structures

Ownership sought to exit a long-held, multi-tenant asset with complex lease profiles. The property featured staggered lease expirations across near-, mid-, and long-term horizons, a mix of lease structures (including operating expense pass-through caps), multiple renewal options, and a right of first refusal held by a tenant occupying approximately 32% of the project. These dynamics complicated underwriting and buyer perception, particularly around timing, income durability, and execution.

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We developed a sale strategy designed to engage both owner-user buyers and institutional and private investors, based on a low probability assessment that the ROFR tenant would ultimately exercise. The asset was positioned with a disciplined narrative around current income, embedded optionality, and future re-tenanting or repositioning opportunities. By creating a competitive environment and focusing outreach on qualified, well-capitalized buyers, we were able to generate multiple credible offers and establish real market pricing tension.

Despite our initial assessment that the ROFR tenant was unlikely to acquire the property, our process generated multiple bona fide offers from qualified buyers. When presented with contracts and market-supported pricing, the ROFR holder elected to exercise its right and move forward with the acquisition. The transaction successfully closed escrow on the entire project, providing the seller with a clean exit.