By Dave Schwab

The historic, mixed-use William Penn Building on the corner of Fifth Avenue and F Street in the Gaslamp Quarter was sold recently for $10.2 million to an affiliate of Maxxam Enterprises, a Beverly Hills-based commercial property management firm.

The sale was part of a 1031 exchange, which allows an investor to sell a property in order to reinvest the proceeds in a new property and to defer all capital-gain taxes.

Completed in 1913 with extensive seismic retrofitting and renovations in 1999, William Penn consists of 18 residential units as well as 10,795 square feet of ground-floor commercial space.

Located on 5,000 square feet of land in the center of the Gaslamp Quarter in Downtown San Diego, William Penn Building’s residential units feature nine-foot ceilings, accent walls, skylights, custom blinds, dishwashers and microwaves. Each unit is equipped with high-speed Internet access and cable. Most of the residential units (15 of 18) are furnished with premium-grade furniture.

Maloney’s Tavern is the building’s anchor tenant. The building is designated as historical on the San Diego Register and the National Register of Historic Places.

The recent transaction was brokered by Jim Neil, Eric Comer and Merrick Matricardi of the Commercial Broker Richard Ellis (CBRE) multifamily team that represented the seller, Penn LLC. Gregg Seaman of Viewpoint Equities was the managing member. Maxxam Enterprises represented themselves.

“Due to the stunning architecture and its location in the heart of the Gaslamp address, the William Penn attracted over a dozen strong offers even with the corner retail vacant, which had previously been occupied by Starbucks,” said CBRE in a statement. “The residential units were 100 percent occupied at the time of sale. Maxxam came in with a strong and aggressive offer to get the deal done.”

“The William Penn Building will continue to operate the building in its current form,” said the property’s manager, Gotham Management.

The building has a long and storied history, having been owned — or leased — by some of San Diego’s more prominent citizens.

The Penn Building started out as a hotel, which was part of Horton’s addition to the “new San Diego.” Five stories tall, with a deli and tailor shop on the ground floor, the building’s existing structure replaced a two-story office block, the “Young block,” in 1913.

It was once owned by General William Starkey Rosecrans, who purchased it from A.E. Horton in 1867. Rosecrans was a Union commander during the Civil War, succeeded in his post by Ulysses S. Grant. From 1881 to 1885 Rosecrans also represented California in Congress.

The Penn building was later sold to John Nelson Young in 1875, an undertaker and furniture dealer, who was County Coroner in 1872.

The original William Penn Building was torn down in 1912 and rebuilt with the present, multi-story structure designed by German transplant Eugene M. Hoffman, who did a lot of work for the Spreckels family.

At various times the pioneering Spreckels family owned all of North Island, the San Diego-Coronado Ferry System, Union-Tribune Publishing Co., San Diego Electric Railway, San Diego & Arizona Railway and Belmont Park in Mission Beach.

The Spreckels family also built several Downtown buildings including the Union Building in 1908, the Spreckels Theatre and office building, which opened in 1913, the San Diego Hotel and the Golden West Hotel. Spreckels employed thousands of people and, at one time, paid 10 percent of all the property taxes in San Diego County.

The reconstituted William Penn Building cost more than $8,000 to build in 1913 dollars.

When the building was finished, it was referred to as an “ornament to San Diego.” Made of wood and brick, the exterior of the building had been finished in dark sandstone with light trimmings.

Among the first renters in the building was Judge Moses A. Luce, another Civil War veteran who had fought at Gettysburg and Bull Run. He had been a law school classmate of President McKinley.

The first floor of the newly reconstituted Penn building was divided into a grocery store on the southern half, and a dry goods and crockery store in the northern half. Residing in the building were numerous business professionals including attorneys, engineers, surveyors, real estate agents, physicians and a photography studio. There was also an independent meat market downstairs.

The hotel’s entrance is in the center of the F Street side of the building. The deli is on the corner of Fifth Avenue and F Street. There are two stores on the Fifth Avenue side of the building, one vacant, one a tailor shop.

The property’s broker, CBRE Group, Inc. is a Fortune 500 and S&P 500 company headquartered in Los Angeles. It is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue).  The company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide.

— Dave Schwab can be reached at [email protected].