By Jon Peterson[dropcap]C[/dropcap]ivic Center Tower, a 109,850-square-foot office property at 675-695 N. 1st St. in San Jose, will be sold at auction in a process that begins July 22 and culminates two days later.
The starting bid has been set at $4 million, according to Auction.com. The seller also has set an undisclosed reserve price below which the property will not be sold, according to terms and conditions of the sale posted on the auction company’s Web site.
The seller is commercial mortgage special-servicing company LNR Property LLC, according to Santa Clara County assessor records.
Nate Jones, a senior associate with Colliers International in its San Jose office, said he expected the building to sell for $11 million to $12 million, or about $100 a foot. If so, that would be well less than what was borrowed against the property in 2007—$16.5 million or $150 a foot.
Jones and Andy Zighelboim, a senior vice president with Colliers, are marketing the property. The seller prefers all cash, Jones said.
Despite its North First Street address, the office tower and a small low-rise building next door are in a bit of a commercial property no man’s land between the downtown San Jose office and the North San Jose office and R&D submarkets. Roughly a decade ago, the city of San Jose also moved from its former City Hall across the street to downtown, robbing the area of a significant source of energy and vitality. Santa Clara County administrative offices and jail remain nearby.
The building goes to auction more than 80 percent occupied, but that gauge is expected to fall to approximately 73 percent when the Santa Clara County Housing Authority leaves 8,600 square feet in November and moves to 505 W. Julian St., closer to downtown San Jose, Jones said.
Rents in the property are around $1.60 a square foot on a full-service basis, while market rents for the area are $1.75 a square foot, Jones said. Based on an occupancy rate closer to 95 percent, Colliers estimates that the property could produce a yield close to 9 percent.
The expectation is that the property will attract a value-add buyer.
Civic Center Tower was developed in 1966. The new owner will likely target non-technology company tenants for the building, Jones said. “Rents in this area have increased by 5 percent over the past 12 months, and vacancy is in the range of 15 percent to 20 percent and showing some signs of improvement,” he said.