Repositioning a 1960s Office Building in the Cedros Design District

Property Gallery 9 Photos

Cedros Design District Street Frontage Rooftop Terrace Cafe Booths Covered Parking Common Kitchen Creative Office Suite Renovated Restrooms

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THE OPPORTUNITY
A Well-Leased Building With Rents Far Below Market

The sponsor, Fenway Capital Advisors, was buying a three-story office and retail building on South Cedros Avenue in Solana Beach. It was 95% occupied, with about 20 tenants, and most had been there for more than a decade. On paper it looked stable. But many of those tenants were on month-to-month leases at rents well below the market, and the building hadn't been meaningfully updated in decades.

The sponsor saw the upside: modernize the building, bring it up to the standard of the surrounding coastal market, and lease it at market rents. That plan needed a lender who would fund the renovation and the leasing costs, not just the purchase. They had just completed a similar repositioning of another Solana Beach office property, and they came to RRA Capital to finance this one.

THE PROPERTY
Steps From the Beach, In the Heart of the Design District

The building sits at 308-312 South Cedros Avenue, in the Cedros Avenue Design District. It was built in 1965 on a 0.94-acre lot and includes 79 covered parking spaces, which is rare this close to the coast.

The location is hard to replicate. The Pacific Ocean and Fletcher Cove are less than a mile away, the Solana Beach Amtrak and Coaster station is a 5-minute walk, and Interstate 5 is a quick drive via Lomas Santa Fe. Tenants are surrounded by the shops and restaurants of the Design District, Solana Beach Towne Centre, Flower Hill Promenade and Del Mar Plaza.

THE RRA SOLUTION
Acquisition, CapEx and Leasing Capital in One Loan

RRA provided a $9,460,000 non-recourse, interest-only bridge loan with two extension options. Part of the loan funded at closing for the acquisition, along with an interest reserve to carry the property while tenants turned over and renovations were underway. The rest was held back for capital improvements and for tenant improvements and leasing commissions, available as the business plan moved forward.

EXECUTION
From Cedros Executive Plaza to Terrace on Cedros

The sponsor rebranded the property as Terrace on Cedros and carried out a creative renovation designed to match its coastal setting:

• A new building facade with high-end modern finishes
• Indoor and outdoor patios, balconies and operable windows
• A shared rooftop terrace and outdoor common areas with ocean views
• Upgraded suites and common areas with new lighting and fixtures
• A large common-area kitchen and renovated restrooms, including showers

The result is a mix of professional and creative office suites, including executive and private suites, with panoramic ocean and downtown Solana Beach views.