Oh, how the mighty do fall.
Bank of America has foreclosed on 43 acres in North San Jose once touted as the best remaining corporate-campus development site in all of Silicon Valley.
The lender had no takers for the property at a trustee foreclosure sale on Feb 19 at the Santa Clara County Superior Courthouse, despite starting the bidding at $50 million. That was $36 million less than the bank was owed and a fraction of what the same site sold for a decade ago in 2000 at the height of the dot-com frenzy.
Developer Tishman Speyer Properties bought the land at 2347 N. 1st St. in March 2007 from BEA Systems Inc. for its fund Tishman Speyer Real Estate Venture VI LP. The company paid more than $114 million, or $60 a square foot. Tishman failed to make a principal payment of $84 million that became due on the maturity of its two-year loan last March. The bank filed a notice of default Sept. 11.
The site, which is entitled for 2.8 million square feet of offices and some support retail, has ridden the commercial property booms and busts in Silicon Valley over the last decade. Tishman bought the site from BEA Systems Inc. The software maker acquired it in 2000 in the last days of the dot-com Internet and property boom. The seller was Agilent Technologies Inc., the Hewlett-Packard Co. spinoff.
BEA carried the site on its books at more than $300 million. The company had hoped the property would one day become its corporate campus and planned development to accommodate as many as 8,400 workers.
In mid-2007, Tishman Speyer also said it hoped to start construction on a first phase of office buildings the following year. The company planned 600,000 square feet in two buildings in what it called The Campus@North First. The development was never begun.
John Yandle, a senior vice president and manager with brokerage Cornish & Carey Commercial in Santa Clara, said until there are additional land sales, it is difficult to know what any piece of property is worth. Cornish has been involved in the last two sales of the site and specializes in land in the North First Street corridor.
“No one know for sure if we’ve bottomed out , if companies are going to take space again and what is going on with tenants,” Yandle said. “Those are pretty big data points for anyone looking to buy land for future development.”
Still, he has no doubt that the property will once again be sought after. “This is one of the prime pieces of land in Silicon Valley and one of the largest sites for future development,” Yandle said.
Potential buyers will almost certainly approach the city about modifying the entitlements to open the site to mixed-use development and some lesser densities. “To try to put any one property type on this land now is aggressive,” he said. At the current density, the entitlements also require parking garages and building heights of 12 stories, he said. That makes new development very expensive.
Another approach would be to preserve frontage on North First Street for the most intense development while allowing lesser densities toward the back of the site facing Orchard Parkway, he said. That would allow surface parking for early phases of development that could be replaced later with structured parking.