Commercial Real Estate Blog

Shorenstein has acquired a $51.1M mezzanine loan collateralized by McCandless Towers in Santa Clara. Globe St. is reporting that the the debt was acquired at a discount.

McCandless Towers was purchased by Tishman Speyer last July at a cost of $500 PSF ($213M), representing a 4.5% cap rate. McCandless Towers features two 11-story class A office buildings anchored by McAfee. The project was completed between 1986 and 1988 and features a 1,400 stall parking garage.

Shorenstein has been an active buyer of junior debt in primary markets, picking up debt in Washington D.C., New York, LA, and more locally, a $40 mezzanine loan on the Moffett Towers project in Sunnyvale which we wrote about back in October of 2007.



The WSJ is reporting in their commercial real estate section today on office space in Moscow. The numbers are staggering compared with almost anything we have in the US. The average cost of “prime” space in Moscow is $223 psf per year, up 92% from the first quarter of last year when the average was $121. Adjusting for exchange rates, the rate in 2001 was $61 a square foot.

Some sites near the Kremlin are reported to be asking north of $300 per year ($25 psf/month!).  By contrast, the most expensive space in California comes in at about $192 psf/year, and the highest end space in San Francisco is about $100 psf.

In response to these sky high rents and robust demand, developers are planning on increasing the available inventory of space by 25% by delivering approximately 21.5M square feet of space to the market by 2011.

Amongst the projects being delivered is RussiaLand’s Russia Tower, a massive 600m tall mixed-use project featuring what will be the tallest building in Europe. The project video is featured above. 

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.

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.

Moffett Towers, Jay Paul Company’s massive office project at the intersection of Highway 237 and Highway 101 in Sunnyvale has been on the prowl for tenants since before it broke ground two years ago. Since then, there haven’t been any reports of any tenants signing up to take the space.

Initially Jay Paul brought the project online at an asking rate of $3.25 NNN with a $25 allowance over a shell. Since then they’ve lowered their asking rate to $2.95 and kept the same allowance. We’re now hearing that a couple letters of intent are going back and forth for some space at the project, though its unclear how much space the letters of intent represent and whether they will make it to lease. It should be noted that Brocade  (NASDAQ: BRCD) did consider this project as well as Legacy’s project on North First Street before deciding to take down Hunter Storm’s @First Development.

Sunnyvale is one of the markets that has seen the most speculative construction since rents and activity have spiked in the past few years. Some of the speculative projects in Sunnyvale include:

• Moffett Towers - 1.8M Square Feet (Phase 1 complete; approx. 800K SF)
• 111 Java Drive - 3 Building, 387,196 SF Project; Building 1 under construction
• 525 Almanor Ave - 5-Story 166K SF Building; Ready for TI’s next quarter
• 2502 Town Center Lane - 315K SF Office as part of Town Center Redevelopment. Should be ready approx. Q1, 2009.

In addition to these projects which are already out of the ground, other developers in Sunnyvale have approximately another 1M square feet of Class A entitled. This excludes the 2M square feet that Juniper Networks and Menlo Equities have adjacent to Jay Paul Company’s Moffett Tower project. 

Robert Half International has signed a lease for building 3 at Bishop Ranch to take 236,000 SF of space. Robert Half International (NYSE:RHI) will move its regional operations from Pleasanton, where it occupies 220,000 SF currently across several buildings. The move to San Ramon will be completed in 2010.

In addition to the RHI deal, Bishop Ranch has also recently inked deals for an additional 100,000 square feet with Chubb Insurance, Del Monte Foods, Edgewood Insurance, and U.C. Davis.

Brocade, in an SEC filing dated today indicated that it has acquired land on North First Street for the construction of a 562,000 SF office project. We were previously the first to report on April 4th that Brocade was in negotiations to lease the project, however; as it turns out the transaction actually involved a sale of land and subsequent development agreement for the construction of the buildings and parking garage.

The agreement which was inked on April 24th between Brocade and MFP/Hunter@First Office Partners LLC (Hunter Storm Development of Cupertino and MacFarlane Partners out of San Francisco) consists of a sale of three unimproved parcels that are entitled for approximately 562,000 square feet of space in three buildings. The total purchase price for the property is $50.9 million.

In connection with the purchase, Brocade has engaged MFP/Hunter@First Development Partners, LLC as development manager to manage the development and construction of the office buildings on the property  for approximately $173 million which covers the construction of the three buildings and parking garage.

Brocade also obtained a four-year option to purchase a fourth unimproved approximate 4 acre parcel for a fixed price of approximately $26 million.