By Jon Peterson
Boston-based TA Associates Realty has paid $196 per square foot or $48.7 million to acquire the 248,835 square foot North First Corporate Center in San Jose, according to sources aware of the transaction. The property fronts North First Street in the active San Jose submarket.
The buyer, which has a West Coast regional office in Newport Beach, did not respond to phone calls seeking comment for the story.
The seller was a venture between Campbell-based South Bay Development Company and Los Angeles-based PCCP, who have owned the property since the late 1990’s. South Bay declined to comment on the sales price due to a non-disclosure agreement that it signed with the buyer.
The companies sold the property through the San Jose office of Eastdil Secured, and one of the people involved in the trade was Greg Cioth, a manager director for the company.
“Both [our organizations] had made the decision earlier this year that we had stabilized and renovated the asset, and it was time to move the property on to the next buyer,” says Mark Regoli, partner of South Bay Development.
There is both a re-leasing and redevelopment play with the property. There are roughly 43 percent of the net rentable square feet of the complex rolling within three years. The in-place rents in the asset are approximately 35 percent below market. This situation will allow the new owner a chance to add significant value in the future.
North First Corporate Center is located within the core area that has been defined by the Vision North San Jose plan. The city sees the area as an important employment center in San Jose and has developed several policy documents in order to guide development and growth in this region. The Center provides for an FAR of 1.2 in the North First Street corridor versus the current 0.35 FAR throughout the city. The new zoning would allow for a total square footage in a redevelopment scenario of around 870,000 square feet.
North First Corporate Center was first developed in 1982. The 16.7-acre complex is now 95 percent leased to nine tenants. The asset is an office/R&D business park that has a total of six single-story buildings ranging in size from 35,000 to 54,000 square feet. The property’s net operating income for 2015 is project to reach $2.7 million. The addresses of the buildings are: 2911-2951 Zanker Road, 71-81 East Daggett Drive, 101-121 East Daggett Drive, 41-61 East Dagget Drive, 2940-2960 North 1st Street and 3010-3040 North 1st Street.
The property is located in the Golden Triangle section of North San Jose, which has traditionally been one of the most active submarkets of Silicon Valley. According to data from CBRE, the office/R&D vacancy has decreased in 13 of the last 14 quarters. This has brought the overall vacancy to its lowest rate in 12 years. The current vacancy rate as of June of this year is 12 percent. Rents over the last three years are up 54 percent and have reached its highest level since the fourth quarter of 2001.
The tenants in the property also have the luxury of public transportation access with the VTA light rail stop located in the front of the property itself.
Map courtesy of Apple