Capmark Puts Silicon Valley Office Portfolio on the Market

By Jon Peterson

Horsham, Penn.,-based Capmark Financial Group Inc. is selling a portfolio of eight Silicon Valley office and research and development buildings that it took back from a borrower last year.

The listing is being handled by CB Richard Ellis brokers Joe Moriarty in the San Jose office and Steven Hermann and Robert Gilley in San Francisco.

Offers are to be accepted over the next two to three weeks with the seller accepting bids for single buildings or the whole portfolio. “We think that there is going to be a great deal of interest from institutions, private buyers and foreign capital,” Moriarty said.

Capmark did not respond to phone calls seeking comment. Capmark Financial filed bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in October 2009.

The portfolio, which is almost evenly divided between San Jose and Sunnyvale, is less than 40 percent occupied, Moriarty said. Two buildings are 100 percent leased to strong credit tenants, Juniper Networks and Lockheed Martin, while a third building is fully occupied by CD Networks.

Conversely, properties at 1265 Borregas Ave. in Sunnyvale and 3041 Orchard Parkway in San Jose are both empty. “That fact makes the deal a value-added play,” Moriarty said. “There would be a leasing opportunity for the new owner. This would be the ability to attract some high-tech related tenants into the properties.”

The properties are one- and two-stories with about 90 percent office space. They were developed from 1977 to 1985.

Moriarty expects the deal to produce a low cap rate. “Given that the portfolio has low occupancy, the cap rate on this deal should be low as well,” he said.

The portfolio is being offered without a price.