Vertical Ventures Buys Milpitas Office/R&D Asset for $45.5MM

By Jon Peterson

Walnut Creek-based Vertical Ventures has become the new owner of the 213,519 square foot Sycamore Technology Center in Milpitas. The real estate investment firm has paid $45.5 million, or $213 per square foot, for the property according to sources aware of the transaction details. This purchase price comes in at $2.5 million less than the pricing guidance that was assumed on the property when it was brought on the market for sale last November.

The seller of the property was a venture between Wilton, Conn.-based Westport Capital Partners and San Francisco-based Cannae Partners. These two firms had owned the property since the fall of 2016. The sale of the property was finalized through Cushman & Wakefield. Those involved in the sale include Eric Fox, Steve Hermann, Adam Lasoff and Seth Siegel.

The buyer and seller had been working on this transaction for some time. Vertical Ventures had done its due diligence on the property in April and kept its interest in getting a transaction done over the next several months. The final price was not changed during that time, according to industry sources.

The three-building complex is located at 475, 501 and 525 Sycamore Drive. The office/R&D asset was 85 percent leased to two tenants when the asset was put up for sale last year. These were Spectra Laboratories and SpiderCloud Wireless.

One of the tenants in the property has a lease that is well below market rate. Spectra Labs has been a tenant at 525 Sycamore since 2006. Its current lease is now 80 percent below market rates and will run out over the next two years. The company has invested a large amount of its own capital for the space it occupies, and it has a heavy power infrastructure allowing for flexibility in use. The space taken by SpiderCloud has a rental rate roughly 10 percent below market rates.

The property in Milpitas is located in a market that has seen a rising occupancy, according to data from Cushman & Wakefield. After dropping to below 9 percent last year for the first time in three years, Silicon Valley’s R&D vacancy rate has been increasing for the last three quarters. It finished the second quarter at 10.6 percent.

R&D rents in the market have been moving up slightly. They moved from $2.69 per square foot in the first quarter to $2.73 per square foot on a monthly triple-net basis. This is a five percent increase from a year ago when the asking rent was at $2.60 per square foot.

Sycamore Technology Park is the third asset that Vertical Ventures has acquired in the San Francisco Bay Area in the past 15 months. In February of this year, it paid $29.9 million to acquire the Wakefield Building in Oakland. It also purchased the Dixon Landing Research Park in Fremont for $37.8 million in March of 2019.

West Coast Commercial Real Estate News