Investor Nabs Silicon Valley Offices for $119 Million

Westcore, DRA Advisors, Silicon Valley, San Jose, Fremont, Northern California, Oakland, M West, DivcoWest, TPG Real Estate, Mission West Properties

By Jon Peterson

New York City-based Deutsche Asset & Wealth Management, formerly known as RREEF Real Estate, expects to achieve an initial yield of 6 percent on the 431,490 square-foot Oakmead West buildings in Sunnyvale that it has acquired from Equity Office.

Sunnyvale The Registry real estate Silicon ValleyDeutsche Asset paid $275.7 a square foot in an all-cash transaction, according to industry sources with first-person knowledge of the exchange.

The acquisition is one of three that the real estate manager has made on behalf of three institutional investors for $266 million total. The other two properties are an 89,074-square-foot Calabasas, Calif., neighborhood shopping center, The Courtyard at the Commons, and a 319,844-square-foot Seattle office property at 605-625 Union Station.

Todd Henderson, head of real estate Americas for Deutsche Asset & Wealth, said the three properties share similar qualities, including “a dynamic location within a core market, currently with stable tenancy that should provide consistent income, and low in-place rents relative to market, which we expect to provide appreciation over time.”

“As we continue to leverage our strong industry relationships and expertise in the local markets in which we operate, we are very pleased to add these high-quality assets to our clients’ portfolios,” he said.

The Sunnyvale office campus includes seven two-story office buildings at 490 Deguigne Drive, 610 Deguigne Drive, 920 Stewart Drive, 935 Stewart Drive, 940 Stewart Drive, 945 Stewart Drive and 960 Stewart Drive.

“In the case of Oakmead West, there are some tenants in the property that have leases that are 30 percent below market. There will be a chance to add value as these leases come up for renewal over the next five years,” said Joe Moriarty, a senior vice president in investment properties for CBRE Inc. in its San Jose office.

Moriarty led the brokerage team that represented Equity Office in the Sunnyvale sale. He classifies the acquisition as relatively low risk but with upside potential given the good current income and opportunity to increase value over time.

The property, built in 1998, was 97 percent occupied at purchase. Tenants are a mix of mature, public companies and smaller growth-oriented firms operating mostly in the technology sector.

That includes Trimble Navigation Ltd., which is best known for its global positioning system, or GPS, technology, according to the company. The company’s corporate headquarters address is 935 Stewart Drive. Overall, Trimble occupies two full buildings and a quarter of a third. In February, the company, which is traded on the Nasdaq stock exchange, reported fiscal 2012 revenue of $2 billion, up 24 percent compared to the year before. Net income was $191.1 million, up 27 percent compared to fiscal 2011.

Chicago-based Equity Office has a regional office in San Mateo on 2655 Campus Drive. Equity officials did not respond to requests seeking comment.

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