By Jon Peterson
A partnership of four entities has put up for sale the 18,767-square-foot mixed-use property in Palo Alto located at 2741 Middlefield Road. The asking price is $15.5 million, or roughly $826 per square foot, according to the property’s offering document, an amount just under the price the group paid in March of 2018 when it paid $16 million for the property.
The entities that own the property have a mailing address in San Mateo and are associated Leslie Keyak, president of Laurelwood Properties.
One of the entities is EPA III, which owns 25.40 percent of the property. The other owners are North Laurelwood LLC, which owns 20.35 percent, Peralta Development, which comes in at 33.90 percent, and Western LLC, which has a 20.35 percent stake in the asset. The current owners have held title to the property for a period of just over four years. They paid $16 million, or just over $852 per square foot, for the asset in 2018, as stated in public records.
The listing agent on the sale is the Palo Alto office of CBRE. The team working on the sale includes Charles Strouss, executive vice president, Jonathan Ziegler, analyst, and Yvonne Hsiung, transaction and project manager. CBRE did not respond to a phone call seeking comment for this story.
The property as it stands now is 85 percent occupied. There are three tenants in the property, including the County of Santa Clara’s youth health center, whose lease accounts for 28 percent of the property. This tenant has a lease of 5,264 square feet, which expires in April 2025.
One of the other tenants is Wushu Central, a martial arts school. It has a lease of 5,250 square feet. This lease will not expire until November 2026. The other tenant is ServiceRocket. This company occupies 5,459 square feet, and its space has a lease that will expire in April of next year.
There is some vacant space on the second floor, which amounts to roughly 2,800 square feet. This space could either be leased to a new tenant or it could be occupied by the new owner if the buyer is a user.
If the asking price for the property is achieved, the sale of the asset would deliver a one-year cap rate of 3.24 percent, according to the property’s offering document. This yield would be based on the property’s current net operating income of $501,906. The projected year two return on cost is 6.02 percent. This would be based on the net operating income of $993,568 for that time period.
2741 Middlefield was first developed in 1956 and the property was renovated in 2016. The property covers 0.44 acres of land, and it has 15 surface parking spaces. A city-owned parking lot adjacent to the site allows free, 72-hour parking.