Commercial Real Estate Blog

Blue Coat Systems (NASDAQ: BCSI) has extended its lease at 420 Mary Avenue in Sunnyvale. In addition, Blue Coat signed a lease to take an additional 116,586 square feet at 410 Mary Avenue. The buildings are 3-story Class B+ Office/R&D buildings owned and developed by Jay Paul Company out of San Francisco, the same developer of the Moffett Towers Project.

The term of the new lease for both the existing and expansion space is through the end of November, 2015. The rental rate for the existing premises is $2.09 psf/NNN with annual bumps of about 3.5%. The rental rate for the expansion premises starts at $1.95 with annual bumps of 3%.

The existing space was taken as-is, and the expansion space provided that the landlord, Jay Paul Company out of San Francisco, replace the buildings HVAC system.

This deal highlights the dichotomy in the market right now. Developer Jay Paul on the one hand executes these leases at rates of $1.95-2.09, but then on the other hand has developed Moffett Towers in Sunnyvale where he is asking $2.95 NNN, down from the $3.25 he was originally asking. It highlights why leasing has been slow at that project; there is a good amount of “nice” space available in the market at rates roughly 30-40% less than what new construction is calling for. In fact, construction prices have gone up such that the disparity becomes even greater when you consider the fact that new construction needs to be taken from warm shell to finish while existing buildings might not require tenant improvement work that is as extensive.

The San Francisco Business Times is reporting that Sequoia Capital has signed up for the top floor of Tishman Speyer’s new tower at 555 Mission Street in San Francisco. The 33-Story, 550,000 SF tower is being built by Turner Construction and is currently seeking LEED certification. It was designed by architecture firms Kohn Pederson Fox and Heller Manus.

Sequoia Capital’s deal for the top floor is reported to be coming in around $80 psf. The firm is a renowned VC with a stellar track record, including investments in YouTube, Google, 3Com, Cisco, and a long list of other successes.

Sequoia is currently headquartered at 3000 Sand Hill Road in Menlo Park and occupies building 4 along with other VC’s Menlo Ventures, Trinity Ventures, and 5AM Ventures. It’s unclear whether it is ditching Sand Hill, where rents have shot up to north of $120 psf range (and in one case to $180 psf) , or is setting up a San Francisco office in the face of the resurging internet/web 2.0 scene in San Francisco. The top floor is 15,000 SF, which generally is a big chunk for an expansion/satellite office, let alone most venture capital firms altogether. Another possiblity is that to get the top floor they needed to take down the entire floor, and will elect to sublease a portion of it.

At the end of the day, chances are pretty skinny that they’re ditching Sand Hill Road.

Word is a buyer has been picked by Oracle Corporation (NASDAQ:ORCL). BEA paid about about $335 psf ($130M) in 2007 for the 388,000 square foot tower. You can read more about the story of the tower in a previous post. If I had to guess, I’d say the building will trade for significantly less than what BEA paid for it. It’s going to take a serious piece of equity to buy this vacant building and tenant it up.

I’m going to make a prediction here and say that the buyer is going to pay around $260-270 psf ($100-$104M) for the tower. And since we’re making predictions, I’ll predict the buyer is either (in this order): Legacy Partners, Boston Properties, or Tishman Speyer.

Anybody else want to make a prediction?

We previously reported that the deal was essentially done, but Jones Lang LaSalle (JLL) confirmed today that it is in fact buying Staubach. Jones Lang LaSalle is paying $613M for Staubach over 5 years, with $100M in stock and $123M in cash up front at the closing. An additional $114M in earnouts will be paid to Staubach depending on whether it meets certain performance goals, bringing the total acquisition price potentially to $727M.

The deal is expected to close by the third quarter. The acquisition caps on and off rumours of an acquisition. We indicated on June 9th that it was a done deal, and more details trickled in over the following week.

Verisign, Inc. (NASDAQ:VRSN) is in contract to sell approximately half of its 290,000 SF headquarters in Mountain View, California. They are under contract to sell 675 and 685 East Middlefield Road for approximately $49M ($308 psf). The two buildings constitute about 159,000 SF, which is a bit more than half of the entire headquarters of 290,000 SF.

Verisign purchased the building in October of 2001 from Sobrato for about $120M in 2001 ($750 psf). A copy of the original PSA is available here. They purchased the building to get out of a 10-year lease agreement they signed in October of 2000. That lease agreement had a start rate of $7.50 NNN (per month). A copy of the original lease agreement is available here.

As part of the deal, the buyer which is PR III Middlefield Road, LLC, will lease back the facility to Verisign for a period of 2.5 years, with an option to extend for an additional five. The lease will start at approximately $2.50 NNN.

The project is across the street from Dostart Development’s 690 Middlefield Road project, which is a 340,000 SF Leed Silver Class A project going up on 15.6 acres it acquired from Hewlett Packard last year for about $60 psf (land cost). That project is being marketed at $3.65 NNN with a $35 allowance over a warm shell.

Both buildings benefit from a light rail station within the immediate walking area, though Verisign’s building will require fairly significant improvements to get them to Class A status.

Globe Street is reporting that the Staubach and Jones Lang LaSalle (JLL) merger will be announced as early as today. They are also reporting that the acquisition price (of Staubach) is $835M, a $100M more than was previously reported.

Update (6/16): Forbes is also reporting that the merger will be announced as early as today, except they are reporting a that Jones Lang LaSalle is buying Staubach for $735m.

A little less than a week ago we reported that the rumours of Jones Lang LaSalle (NYSE: JLL) merging with Staubach were true, or so we had heard. Today, Property Week News out of the UK is providing additional credence by publishing a price for the acquisition, $735M.

Property Week’s article indicates that the acquisition price represents a 10x multiple on Staubach’s EBITDA, and a 1.8x multiple on revenues.

No formal announcement has been made, but it seems imminent from what we heard. And from what Property Week is publishing, it will be announced as early as next week. Jones Lang LaSalle and Staubach have refused to provide any comment on the merger rumours.

The deal would represent a smaller acquisition for JLL than the Trammell Crow deal it had chased, but lost to lose it to CBRE.