Behringer Harvard Puts Hitachi-Leased Properties on the Block

Jon Peterson

Dallas-based real estate firm Behringer Harvard and San Francisco’s Digital Realty Trust Inc. are selling two Santa Clara office-R&D buildings that the companies own in a joint venture announced in mid-2010.

The two, fully leased properties, which combined have about 300,000 square feet, are expected to sell for approximately $50 million at a capitalization rate in the 6 percent range based on current income. Both buildings are occupied by the Hitachi Data Systems corporate headquarters and are leased until April 2019.

“We expect them to attract a great deal of investor interest, led by pension funds, REITs and other institutional investors,” said Joe Moriarty, a senior vice president for investment property sales in CB Richard Ellis Group Inc.’s San Jose office. CBRE is managing the sale.

He expects a deal to close by the end of this year or early next, Moriarty said. The properties were developed in 1985.

The assets are located at 700 Central Expressway and 750 Central Expressway and are part of the 456,000 square-foot Santa Clara Tech Center. Digital acquired its 50 percent interest in August 2010, making an initial cash contribution of approximately $6 million while also guaranteeing its proportionate share of $25 million in debt, according to public record.

A third building at 800 Central Expressway is a data center and is not part of the sale. That building is also owned by a joint-venture partnership between Digital and Behringer also announced in mid-2010. The building and land were valued at $27.1 million at that time. Behringer owns its 50 percent through the Behringer Harvard Opportunity Fund I. Digital is the controlling partner in this venture.

Behringer Harvard chose not to comment for this story. According to its website, the company has owned the Santa Clara Tech Center since May 2007.

At the close of the third quarter, the overall Silicon Valley office-R&D market had a 16 percent availability rate on a 152 million square-foot property base, according to CBRE data. Through the third quarter, occupancy has risen by not quite five million square feet on the R&D side and another 2.5 million square feet on the office side. It has been one of the strongest leasing markets he has ever seen, Moriarty said.

Despite the robust fundamentals, property owners are not selling en masse. “Some have sold their assets, while others have made the decision to hold onto their buildings because they are located in such a strong market,“ he said.

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