By Jon Peterson
Los Angeles-based CommonWealth Partners has paid $620 per square foot or $263.3 million to acquire the 424,825 square foot Sunnyvale Office Park located at 1184, 1194 and 1220 North Mathilda Avenue in Sunnyvale, according to sources with direct knowledge of the transaction.
The cap rate on this deal was 6 percent. This return is based on the current net operating income being produced by the property.
“I think that this transaction shows that [there] still is a great deal of capital interested in buying fully leased properties to quality tenants in our market. The cap rate on this deal doesn’t surprise me. I know that some of my clients would like to buy properties in the area at 7 percent cap rates, but those days are gone,” says Kalil Jenab, executive managing director/principal for Cassidy Turley Commercial Real Estate Services. He works out of the company’s East Palo Alto office.
CommonWealth bought the complex from New York City-based Tishman Speyer Properties. The buyer did not respond to phone calls for this story. The seller declined to comment.
The Sunnyvale Office Park is fully leased to Juniper Networks. The software, silicon and systems company uses the building at 1194 Mathilda for its corporate headquarters location.
According to data supplied by Cassidy Turley, the leases with Juniper run through end of June 2020 on 1194 North Mathilda, end of October 2021 on 1184 North Mathilda and end of November 2022 on 1220 North Mathilda.
According to the CommonWealth Partners Web site, the real estate investment manager owns three other office properties in the San Francisco Bay Area. These are the 665,000 square foot 560 Mission Street in San Francisco, the 184,142 square foot 650 Page Mill Road in Palo Alto and the 54,000 square foot 975 California Street, also in Palo Alto.
CommonWealth Partners main investment entity is Fifth Street Properties. This is a partnership with the manager and the California Public Employees Retirement System. In July of last year the pension fund allocated $1.75 billion of new investment capital to the partnership for new investments.
Fifth Street only invests in office buildings. These can be in central business districts or for suburban properties. The leverage component on the partnership is 45 percent.
San Francisco is one of the targeted markets for the core portion of the investment strategy for Fifth Street Properties. The other markets are Washington, D.C., Boston, New York City, Southern California and Seattle. Transactions on core properties make up 85 percent of the strategy for the partnership.
The other 15 percent are value-added deals that will include properties with higher vacancy rates. These assets would be in markets like Austin, Denver, Chicago and Salt Lake City.
CommonWealth has full investment discretion on Fifth Street Properties. This will allow the real estate manager to make the final decisions on transactions on its own, without needing any approval from CalPERS.
Photo courtesy of Tishman Speyer