By Nancy Amdur
KBS Real Estate Investment Trust III, Inc. plans to thicken its Silicon Valley portfolio with the purchase of a prominent three-building office complex in downtown San Jose.
The non-traded REIT last week entered into a purchase agreement to acquire the Almaden Financial Plaza at 1, 55 and 99 Almaden Blvd. The company will pay approximately $150 million, or about $360 per square foot, for the property, according to a filing with the U.S. Securities and Exchange Commission. An affiliate of Belmont-based Embarcadero Capital Partners LLC is reportedly selling the property after acquiring it in 2012.
Almaden Financial Plaza, which sits on 5.8 acres at the intersection of Almaden and West Santa Clara Street, is among a handful of trophy office properties in downtown San Jose, said Sethena Leiker, a San Jose-based senior analyst with commercial real estate services firm Cushman & Wakefield.
The three Class-A office buildings comprise 416,127 square feet and range in height from eight to 12 stories, offering panoramic views of the city and Silicon Valley. The properties were built between 1980 and 1981 and renovated in 2006. The Almaden Financial Plaza as of early this month was 94 percent leased to 54 tenants with a weighted-average remaining lease term of 3.9 years, according to the securities filing. Tenants include financial service providers, law firms and technology companies. Floor plates range from 10,500 square feet to 17,941 square feet, according to a building brochure.
The office complex’s amenities include a café, fitness center, shared conference facility and outdoor collaborative seating areas. A detached parking garage is on site. The Almaden Financial Plaza is within walking distance of restaurants, retail and public transportation along with the San Jose Convention Center.
This is just the latest downtown San Jose office property bought by KBS REIT III. The company at the end of last year spent $116.7 million, or about $377 per square foot, to purchase Ten Almaden from Chicago-based Equity Office Properties. Ten Almaden is a 17-story tower comprising 309,255 square feet. The company plans to fund The Almaden Financial Plaza purchase with proceeds from a mortgage loan from an unaffiliated lender and proceeds from its now-terminated primary initial public offering, the filing said.
Vacancy rates in downtown San Jose have been dropping steadily over the past 24 months, which, in turn, is driving up rents, Leiker said. The Class A office vacancy rate in downtown San Jose is 16.9 percent with an average full-service rent of $3.31 per square foot, according to a second quarter report by Cushman & Wakefield, compared to a 19.7 vacancy rate and an average rent of $3.14 per square foot during the same period last year. Access to transit and amenities along with new housing projects in the city’s downtown likely will boost the area’s office demand even more, Leiker said.
KBS REIT III is part of Newport Beach, Calif.-based KBS Capital Advisors. The company’s other San Jose holdings include the Corporate Technology Centre office campus at 100 Headquarters Drive; an office/research-and-development property at 3200 N. First St.; and an office building at 350 E. Plumeria Drive. KBS acquires properties in the office, industrial, multifamily and retail sectors.
A KBS REIT III spokeswoman said the company declined to comment. Embarcadero Capital Partners did not return a call for comment.