Clarion Buys Santa Clara Office Project for $299MM

Clarion Partners Santa Clara Palo Alto Menlo Equities Beacon Capital Partners Silicon Valley Eastdil Secured Oregon Public Employees Retirement Fund

Clarion Partners Santa Clara Palo Alto Menlo Equities Beacon Capital Partners Silicon Valley Eastdil Secured Oregon Public Employees Retirement Fund
By Jon Peterson

New York City-based Clarion Partners is in the process of buying the 450,000 square foot first phase of the 3333 Scott Blvd. office building in Santa Clara for approximately $665 per square foot or $299.2 million, according to sources that are aware of the transaction. The deal has not closed, but Clarion has put up a $40 million non-refundable deposit.

A company representative of Clarion declined to comment when contacted for this story. The deal is set to close no later than December 22nd.

The seller of the property is a joint venture between Palo Alto-based Menlo Equities and Boston-based Beacon Capital Partners. Menlo Equites would not answer any questions about the sale price on the transaction. Beacon Capital also declined to comment.

The sales price on the first phase of this development is a high price for the Santa Clara office market. According to industry sources, the price on a square foot basis is at a level that is more seen in a market like Sunnyvale.

The planned sale of the property is being done through the San Francisco and Silicon Valley offices of Eastdil Secured on behalf of the sellers. The people involved in the sale are Greg Cioth, manager director in the Silicon Valley office, and Jeff Weber, senior managing director in the San Francisco office.

Clarion is planning on buying the property for its separate account relationship with the Oregon Public Employees Retirement Fund. Anthony Breault, senior real estate investment officer for the Oregon State Treasury, wrote in an e-mail that the “Santa Clara acquisition is one that we are pursuing with Clarion, however we cannot comment at this point as we have not closed, and we are actively negotiating with the seller.” Oregon State Treasury makes investment recommendations on behalf of Oregon PERF.

The sale of the first phase is expected to produce a 5.5 percent cap rate, according to sources that are familiar with the property. The return would be based on the asset’s current net operating income.

The first phase of 3333 Scott involves three office buildings that are now 100 percent leased. Two of the tenants in the property are Palo Alto Networks and Hitachi. The two other phases of the property are either under construction or in planning and are 100 percent pre-leased.

Phase II is a multi-story office building under construction that should be completed by December of 2016. The property is fully leased to Hewlett-Packard for the next 11 years. Phase III is in the pre-development stage of the property. A lease for the next 10 years has been signed with Palo Alto Networks for the entire property. The leases for phase II and III are rented at north of $3.00 per square triple-net. The total project for 3333 Scott covers 30.2 acres of land and 1.3 million square feet, according to the Menlo Equities Web site.

West Coast Commercial Real Estate News