Commercial Real Estate Blog

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?

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.

Got this sent to me earlier. Guess this explains why having a company evacuation plan is a good idea.

…and from another angle for your viewing (dis)pleasure …

It’s been rumoured in the past that Google was nibbling at taking down space at Jay Paul’s Moffet Towers Project. In what could be construed as less than favorable news for Moffett Towers, insofar as Google is concerned, NASA announced today that it has inked a deal with Google for 42 acres of land at the NASA Ames Research Center in Mountain View for the purpose of developing a high-tech campus for Google. Under the terms of the 40-year lease, Google will lease 42 acres to construct up to 1.2 Million square feet of an office and R&D campus. Google will pay NASA an initial base rent of $3.66 million per year. NASA will use the proceeds to cover the full cost of the lease and the balance may be used for capital revitalization and improvements of the real property assets at Ames.

Construction of the project will be in three phases, with the first planned to begin by the end of September 2013, the second phase by 2018, and the third by 2022. Google also intends on constructing company housing and dining, sports, fitness, child care, conference amenities.

In the late nineties, Sobrato signed a ground lease for the construction of its Mission Valley College office campus in Santa Clara. That was a 26-acre piece that they used to develop 685,000 SF of office on. That lease represented about $.147 per SF, per month on the dirt, and $.243 per buildable SF. In contrast, the Google/NASA deal has Google paying about $.164 per SF, per month on the dirt, and ultimately when the 1.2M SF is built out, $.254 per buildable SF.

In a coup for Lennar Corp, San Francisco voters pushed through Proposition G and struck down Proposition F yesterday. Proposition G gave the green light to Lennar’s plans to develop a shipyard at Hunters Point and Candlestick Point. Proposition F would have required that a minimum of 50% of the housing portion of the development master plan be provisioned as affordable housing.

Proposition G encourages the city to support a development plan consisting of:

• over 300 acres of public park and open space improvements;
• between 8,500 and 10,000 homes for sale or rent;
• about 700,000 square feet of retail uses;
• about 2,150,000 square feet of green office, science and technology, research and development, and industrial uses;
• a possible arena or other public performance site;
• a site in Hunters Point Shipyard for a new stadium if the 49ers and the City determine in a timely manner that the stadium is feasible;
• additional green office, science and technology, research and development, and industrial space, and/or additional housing if a new stadium is not built.

Proposition F would have made it City policy to require:

• At least 50% of all new housing units developed in the project site would be affordable so that at least:
  • one-sixth of all units are affordable to households earning no more than 80% of the San Francisco median household income (SFMI);
  • one-sixth are affordable to households earning no more than 60% of SFMI; and
  • one-sixth are affordable to households earning no more than 30% of SFMI.

Of course, it should be noted that other hurdles remain in place before all this is built. Environmental reviews need to be conducted, a development agreement has to be crafted and approved by the City’s supervisors, and the project needs to pencil given the fact that Lennar will be responsible for a laundry list of items include site work, transportation upgrades, roads, and other infrastructure.

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.