Boston Properties Acquires Santa Clara Asset for $78MM

Boston Properties Santa Clara Eaton Vance Corporation Irvine Company Santa Clara Square Clarion Partners North San Jose Google 3625 Peterson Way

Updated April 27, 2016

Boston Properties has been strategically buying and selling assets throughout the region as opportunities arose, and this week it made an effort to expand its footprint in Silicon Valley by acquiring the 218,000 square foot building located at 3625 Peterson Way in Santa Clara for $78 million, or roughly $358 per square foot, according to public records.

According to public records, the seller, Eaton Vance Corporation, purchased the building in March of 2008 for $53 million, or $243 per square foot. The cash yield for Boston Properties on the investment is 4.6 percent. Boston Properties’ plan is to hold the asset and then redevelop the property for a planned delivery in 2023. The projected cost for the development is around $700 per square foot, and the expected initial return once the project is finished is 7 percent. The rents in the property are planned to be less than 10 percent above market rents.

The 1979-built industrial building is home to Spectra Physics, a subsidiary of Irvine-based Newport Corporation, whose lease runs for another five years. The company builds laser systems at this facility, and it announced in 2009 that it was consolidating all of its operations under this one roof from the five buildings it used to occupy in Mountain View.

This building is in close proximity to several large scale developments that have been in the news recently. Perhaps the largest of them is Irvine Company’s Santa Clara Square, an 80-acre mixed use development that will feature 1,800 apartments along with 1.7 million square feet of office and a 120,000-square-foot retail center.

Another large development in the vicinity is the 3333 Scott Blvd. office development, which was purchased in December of 2015 by New York City-based Clarion Partners for $677 per square foot or just over $305 million.

Boston Properties has been purchasing and selling assets in Silicon Valley as opportunities arose. In October of 2015, the company announced that it sold a 26-acre site located in North San Jose with one occupied and three vacant existing office buildings and a total of approximately 574,000 square feet for $207 million. The buyer was Broadcom.

In July of 2014, the company sold the 135,000 square foot Mountain View Technology Park and the 63,000 square foot Mountain View Research Parking Building Sixteen to Google. The sales price was $92.1 million or $465 per square foot.

At the same time, the company is building an urban campus development in the Central SoMa neighborhood of San Francisco. Plans call for the 2.3-acre site to feature an office-and-retail complex with three building components accented by a 240-foot tower. The property would comprise 907,300 square feet of office, 9,900 square feet of retail and 54,000 square feet of “flex” space on the ground floor, which could be used for light industrial or neighborhood retail space.

Perhaps its most significant development in San Francisco is the Salesforce Tower, which the company is developing in partnership with Hines. The Bay Area is one of four strategic investment areas for the company, and it remains one of the most active players in the region.

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