By Jon Peterson
Saratoga-based Pelio & Associates has paid $7.5 million or $32 per square foot to acquire the former Memorex facility located at 1220 to 1320 Memorex Drive in Santa Clara, according to sources familiar with the transaction.
The financing on the property had gone into a default, and it was sold by the mortgage servicer, New York-based C-III Capital Partners. This was the primary reason why the property had such a low price per square foot, according to companies that were aware of the transaction.
C-III was represented in the deal by NAI Northern California. The buyer completed the transaction in working with Colliers International in its San Jose office. Neither of these brokerage firms would comment on the purchase price of the property.
San Jose-based Barry Swenson Builders had acquired the 230,000 square-foot property from Memorex several years ago. The property sits on 9.11 acres in the heart of Santa Clara, just minutes away from its City Center and the Norman Y. Mineta San Jose International Airport.
“I think that this property represents a strong value-added investment opportunity for the buyer. The property is now 50 percent leased. The buyer will be investing some additional capital into the asset, which should help it to attract some new tenants to the property,” says Steve Zamudio, a senior vice president with Colliers International. He worked on the deal with Pelio & Associates.
The facility has the capaicty to offer large blocks of space for potential new tenants. “This project will be able to bring in tenants for anything from 5,000 to 50,000 square feet,” said Zamudio.
“We’re seeing an increasing trend with foreclosed assets where they trade at what appears to be a substantial discount. In most cases there is a significant environmental issue, or other challenges that make the asset “challenged” in the first place. NAI has handled a large number of special assets and receivorships ranging from the early notice of default stage, through REO. If marketed properly, the actual adjusted discount is probably smaller than ever right now,” added James Kilpatrick, president of NAI Northern California.
The Memorex facility is considered a mixture of office/R&D/manufacturing/warehouse. Zamudio sees the property located in a very tight Silicon Valley market for space of that size. “Vacancy in Santa Clara is now around five percent. Rents increase significantly in this region last year, and we are hopeful this will continue to happen in 2014,” he said.
“I think that the facility being near the rail line should allow it to attract some new tenants,” says Douglas Sharpe, a senior vice president with NAI, who works out of the company’s office in San Jose.
The region is expected to achieve very good net absorption in 2014 due to historic low supply, according to Jeff Fredericks, executive managing director with Colliers in San Jose who recently presented a very optimistic Silicon Valley outlook at the company’s annual Trends2014 forecast event.
Map courtesy of Apple