By Jon Peterson
Irvine, Calif.-based HCP has placed under contract with Google for sale its 800,000 square foot Shoreline Technology Center campus in Mountain View for $1 billion, as stated by the publicly-traded real estate investment trust in its 2018 third quarter earnings report and sources with knowledge of details of the deal. This disposition is expected to generate a gain on the sale of around $700 million upon closing in the fourth quarter.
The campus is located across 12 buildings along Stierlin Ct. in Mountain View. The property, formerly known as Britannia Shoreline Technology Park, is 92 percent occupied by Google, according to HCP.
The cap rate on the planned sale is 3.5 percent, based on the properties’ existing net operating income. The leases on the property now are 25 percent to 30 percent below market, according to HCP, which held an earnings conference call earlier today. The weighted average lease term remaining on the leases is four years. Once the leases expire, they would be brought up to market placing the cap rate on the asset in the low four percent range.
“This transaction highlights our ability to unlock meaningful shareholder value and generate attractively-priced capital, which we will use to deliver and further strengthen our balance sheet as well as fund future accretive growth,” said Peter Scott, executive vice president and chief financial officer of HCP in the earnings report.
HCP plans to use the proceeds from the sale to initially repay around $1 billion of debt at an average interest rate of approximately 3.5 percent. Over time the company is planning to redeploy a portion of the capital from the sale into future acquisitions and to fund its development and redevelopment activity while maintaining a target net debt to adjusted EBITDA ratio in the high five times range.