By Jon Peterson
San Francisco-based TMG Partners has paid more than $50 million to purchase two Silicon Valley workplace properties, both with its equity partner Boston-based Alcion Ventures. TMG hopes to land a single tenant for each building.
The duo paid just under $270 a square foot, or $41.3 million, to purchase the four-story, 153,000-square-foot office building at 2851 Junction Ave. in North San Jose. The 10-year-old, Class A office building had been occupied by Santa Clara County, which has vacated.
TMG bought the property with cash and a new loan provided by Comerica Bank out of its San Jose office. The seller was Chicago-based Kaufman Jacobs Real Estate Investments. Mark Ziemendorf, a senior vice president and director with Cornish & Carey Commercial Newmark Knight Frank in its Santa Clara office, represented the seller.
TMG and Alcion also have acquired Santa Clara’s 3003 Bunker Hill Lane, paying $150 a square foot, or $12.1 million, to buy the nearly 81,000-square-foot office and research and development building. TMG plans a new lobby, renovated common areas, restrooms, mechanical systems and outdoor seating areas, said David Cropper, a TMG managing director. The partnership plans to begin work in the first quarter of next year with the expectation of finishing in the following four months to six months. He did not yet have a final budget for that work, Cropper said.
“The location would allow employees to walk up and down Great America Parkway, and it’s also near the Santa Clara Convention Center and the San Francisco 49ers’ new football stadium. At this point we are not sure what kind of new amenities could be added. We are thinking about a sport court or a bocce ball court,” Cropper said.
The new owners have hired Phil Mahoney, an executive vice president with Cornish & Carey in its Santa Clara office, to handle leasing for the North San Jose building. He is expected to target technology companies. The building already has some of the major amenities that technology tenants want, Cropper said. “It has an existing cafeteria, so we won’t have to add any new kind of food operation. One thing that we are thinking about is a car-charging station, so if any of the employees own [an electric car] they would be able to charge their car while at work,” he said.
“We think there is going to be strong leasing in the future [in Silicon Valley], and we have seen this in the fourth quarter as well,” Cropper said.
At the Santa Clara property, there is an existing tenant that has a separate entrance at the back of the property and occupies around 6,000 square feet. The lease has approximately two years of remaining term. “If we sign the lease to a single company, this firm will have some built in expansion capabilities when the existing tenant leaves,” Cropper said.
The deal on the Santa Clara property had a very long closing period. The seller was a family trust that preferred the timetable. The price was set in April, Cropper said. Senior Vice President Jeff Ramirez and Senior Advisor Kyle Nelson of Cornish & Carey in its Santa Clara office represented the seller. The property was purchased for a mixture of cash and debt provided by California Bank & Trust out of its regional operation in San Francisco.
“We think that the Silicon Valley is a strong market for investing when you consider the demand for space from technology companies and how rents have improved over the past year,” said Mark Potter, a founding partner of Alcion. Potter expects to continue to buy properties in the region through deals with TMG.