Southern California’s Irvine Co. continues to build its Silicon Valley empire, expanding not only its office property holdings but its retail and apartment interests as well.
Along with the property, and approximately 500,000 square feet of existing office and retail building, Irvine has acquired the right to demolish the existing development and to build not quite two million square feet of offices and 35,000 square feet of shop and restaurant space.
Irvine intends to begin construction in the second quarter of next year on three buildings with nearly 500,000 square feet at what the city of Santa Clara calls the Augustine-Bowers project, according to a source with direct knowledge of events. The developer hopes to deliver the buildings by the end of 2014. A second phase would be more than 610,000 square feet.
At the same time, Irvine says it plans to start construction later this year on the second phase of its Santa Clara Gateway project. The company confirmed Aug. 22 that it has secured a second, full-building tenant for the first phase of the development at Great America Parkway and state Highway 237, also in Santa Clara.
It plans to start the Gateway’s second phase, with another three buildings totaling 464,000 square feet, later this year and to deliver them at the end of 2013. Irvine broke ground on the first three buildings at Santa Clara Gateway with 447,000 square feet in April. It plans to deliver those buildings by the middle of next year.
Dell Inc. has agreed to take one 150,000-square-foot building at the Gateway development. The identity of the second tenant could not be confirmed. Irvine said it is in negotiations with a third tenant to take the final building in the first phase of the project but did not disclose any detail.
Neither Irvine nor Equity Office has revealed the purchase price for the Augustine-Bowers property, and public records filed with the Santa Clara County Clerk-Recorder’s office state only that “valuable consideration” was paid. They do not indicate that a lender is involved in the transaction.
Real estate investment banking company Eastdil Secured LLC acted as the lead investment agent on behalf of the seller, Equity Office. Steve Horton and Dennis Chambers, partners at Cassidy Turley Commercial Real Estate Services, worked as supporting consultants and market specialists in cooperation with Eastdil on behalf of EOP.
The city of Santa Clara contemplates four office towers up to 14 stories, or 244 feet, high, at the 101 property. “Two of the towers will be located on the northern half of the site and the remaining towers will be located on the southern half of the site. Focusing development in towers and parking structures will allow large open space areas on the project site in lieu of having a substantial portion of the site devoted to surface parking,” the city concluded in a staff report endorsing the development in 2009.
“The character of Bowers Avenue and Augustine Drive will be altered from the existing one- and two-story development as a result of the proposed high-rise office towers and parking structures.”
Irvine takes a “comprehensive” view of the markets in which it does business, seeking to invest across property types including offices, shopping centers and multifamily housing, sources with first-hand knowledge of the company’s operations said. They did not want to be identified because they are not authorized to speak to the press on behalf of the company.
It is fair to interpret the company’s actions as a strong vote of confidence in the Silicon Valley’s future, one inside source said: “We are very, very bullish.”
Irvine typically adopts a strategy that calls for geographic concentration, a pattern that is becoming increasingly obvious in Silicon Valley as the company expands its footprint in the region.
Its latest Santa Clara site is two miles from Irvine’s Santa Clara Gateway office development and not too much farther from the company’s extensive apartment holdings in North San Jose.
It is currently building 1,750 apartments at Crescent Village in North San Jose. They are a stone’s throw from Irvine’s existing North Park apartment community, which has 2,760 units and was built from 2001 to 2007. When Crescent Village is complete, the company will have more than 5,500 apartments in the Bay Area, all but a handful in Silicon Valley.
In the past year, the company has acquired the Silicon Valley Center at 2540-2590 N. First St. in San Jose, a 439,000-square-foot office campus, and Central Research Park, with eight buildings and 468,000 square feet, near North Mary and Potrero avenues in Sunnyvale.
Including those acquisitions but excluding the Santa Clara developments, Irvine owns and manages more than three million square feet of offices in Sunnyvale, Milpitas and San Jose.