By Jon Peterson
San Francisco-based Swift Realty Partners has paid approximately $30 million, or $183.50 a square foot, to buy two empty Borregas Avenue buildings in Sunnyvale’s rapidly transforming Moffett Park, according to two sources with direct knowledge of the transaction.[contextly_sidebar id=”b83e2527d5bc2b2342ca302b805d356f”]Swift acquired the properties with a financial partner and is expected to invest an additional $8 million to $10 million in renovation. The landlord plans to target technology companies to occupy both properties, which are suitable for single or multiple tenants.
The sellers are a joint venture of Boston-based The Rockpoint Group and Belmont-based Embarcadero Capital Partners. Rockpoint was the majority owner, and Embarcadero was the local operating partner. The firms acquired the nearly 70,000-square-foot 1265 Borregas and the 95,000-square-foot 1272 Borregas as part of a larger portfolio in June 2011.
“The properties are across the street from light rail, which should be looked upon as a plus for technology companies,” said Eric Fox, a senior managing director and principal in the San Jose office of Cassidy Turley Commercial Real Estate Services. Fox represented the sellers.
Neither of the parties, including Fox, would discuss the terms of the transaction. Swift Realty Chief Executive Christopher Peatross said he could not disclose his capital partner. The buildings were not acquired for Swift Realty’s first private real estate fund, Swift Fund I.
Sunnyvale has long been the less-expensive overflow market for Palo Alto and Mountain View but has emerged as a more equal player in this cycle. Its Peery Park, which is adjacent to Moffett Park, is home to the new LinkedIn Corp. headquarters. Google Inc. and Apple Inc. are both in town as is Amazon.com Inc.’s Lab126. The vacancy rate in Peery Park today is zero, according to new numbers from Cornish & Carey Commercial Newmark Knight Frank. Moffett Park has a 6 percent vacancy rate.
Average rents based on actual transactions climbed in Moffett Park in the first quarter to now from $2.87 to $2.90 per square foot, according to Cassidy Turley research.
Lockheed Martin previously occupied 1272 Borregas, a two-story office and research and development building. It is the larger of the two properties and has been vacant for a year. 1265 Borregas has been vacant even longer.
“I think that the timing is right for the new owner. The two properties are in a good location, and the market in Moffett Park for office buildings is tightening up. With a little TLC, these properties should be able to attract tenants in a short period of time,” said Kalil Jenab, executive managing director and principal with Cassidy in its East Palo Alto office.
Rockpoint owned the two properties for its commingled fund, Rockpoint Fund III. The manager raised $2.5 billion in equity for the fund and had a final closing on the capital raise in 2008. Investment commitments to the fund included $200 million from the California State Teachers’ Retirement System, $110 million from New York State Teachers’ Retirement System and $150 million from the state of Oregon’s Public Employees Retirement System. Fund III is considered an opportunistic investment fund.
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