Jay Paul Pursues Huge New Sunnyvale Office Development
And the beat goes on.
Jay Paul, the mastermind behind the wildly successful 1.8 million-square-foot Moffett Towers development in Sunnyvale, is at it again.
The San Francisco-based developer has filed a preliminary application with the city of Sunnyvale to develop 770,000 square feet of new offices on a 27-acre site a stone’s throw from his previous development.
Paul submitted the plan to the city of Sunnyvale on April 4 as the first step in gaining government approval to build two, seven-story office buildings, one six-story office building and a single-story amenities building at 1152 Bordeaux Drive, said city spokesman John Pilger.
A city Project Review Committee, an internal and interdepartmental body that primarily verifies that a development application is complete, approved the plan April 23. The next step is a formal planning application, which is anticipated sometime this summer, Pilger said.
So long as the proposed project outlined in the formal application jibes with an existing city-approved “specific” land plan for Moffett Park, “it is a done deal,” Pilger said.
Paul acquired the Bordeaux Drive property, which includes not quite 327,000 square feet of industrial development, from San Francisco real estate investment trust Prologis Inc., paying $84 million. That equates to nearly $257 a square foot for the buildings or just more than $70 a square foot for the land. The lender was the Starwood Capital Group.
Starwood Hotels and Resorts counts as one of its hotels the Sheraton Sunnyvale at 1100 N. Mathilda Ave., next door to the former Prologis property.
Both Moffett Towers and the new development sit at the junction of U.S. 101 and state Route 237, which connects the South Bay in Mountain View with the East Bay’s Interstate 680 at Milpitas, crossing 101 as it goes. Route 237 has emerged as a strong favorite for corporations looking for large blocks of space, drawing the likes of Dell Inc., Polycom Inc., Flextronics International Ltd. and Microsoft Corp., among others, in the last 12 months alone.
Paul is now building the final tower—the seventh—at the Moffett Towers development; it has eight stories and 357,000 square feet.
Kalil Jenab, a partner with brokerage Cassidy Turley and an expert on Moffett Park commercial real estate, said endeavors like Paul’s are changing the face of Silicon Valley. “The park’s strategic location and access to 237 and the [Valley Transit Authority] combined with the commitment from developers like Jay Paul will help transform Moffett Business Park to a true tech hub in the next few years,” Jenab said in an email message.
Strong signals also are telegraphing that Jay Paul is looking to acquire several additional parcels in the vicinity. Two former restaurant buildings—now demolished and fenced—on two adjacent sites that also front North Mathilda are said to be in play. Each measures a bit more than two acres. Also in play are a two-story office building at 1153 Bordeaux Dr. and the property occupied by the Cogswell Polytechnical College, a knowledgeable source said. Calls to the college were not returned.
Several of those properties’ owners also control a more than two-acre site that once was a manmade lake intended as a collective amenity, two sources said.
Brokerage Cornish & Carey Commercial Newmark Knight Frank has begun distributing information detailing an offering for a “[n]ew Class A office development,” called Moffett Place in Sunnyvale. The first phase with 500,000 square feet is to be completed by October 2013 and a second phase with an additional 500,000 square feet is to be complete by April 2015, according to information reviewed by The Registry. The asking rent is stated as $3.50 a square foot, with tenants picking up the tab for expenses. The developer is listed as the Jay Paul Co.; the listing agent is identified as Phil Mahoney, a Cornish executive vice president who represents Jay Paul in all of its Moffett Towers leasing.
Mahoney confirmed the developer’s acquisition of the Prologis site and building, though he did not disclose the price. He did not confirm any details regarding additional property purchases that Jay Paul might be pursuing in the area.
During a May 1 conference call with analysts detailing the results of first-quarter operations, Prologis Co-Chief Executive Hamid Moghadam said the company is “once again seeing opportunities to utilize our platform for value-added conversions.”
“During the quarter, we completed one such transaction in Silicon Valley, generating an economic gain of more than $23 million, or 38 percent higher than the value of the property as an industrial asset,” he said.
The former AMB Property Corp. announced the conversion initiative in 2007 before its merger with Prologis, he said, and has completed about $30 million a year in such dispositions. With the merger, however, he expects that value to rise.
Later in the call, under questioning from an analyst regarding similar sales in the future where buyers want to convert the property from industrial to other uses, Moghadam said he expected to see a flush of such sales in Silicon Valley. “These opportunities really come up in only a couple of markets” including Southern California and the valley, he said. “Based on what I’m seeing in Silicon Valley, a lot of it is going to happen right there in the Bay Area, given all of the activity that is going on,” he said.
“I think we are entering the sweet spot of the cycle,” he added.
Tagged AMB Property Corp., Bay Area, California, Cassidy Turley, commercial real estate, Cornish & Carey Commercial Newmark Knight Frank, Jay Paul, Milpitas, Moffett Towers, Northern California, Prologis, San Francisco, Silicon Valley, Starwood Capital Group, Sunnyvale