Prentiss Leases 71% of Former 3Com Campus

SANTA CLARA, CA-Prentiss Properties Trust has filled more than 70% of a vacant 306,400-sf R&D/flex-office campus here that it acquired last month from 3Com. Hyperion Solutions Corp. signed a long-term lease for 219,721 sf that soaks up two of the campus’ three buildings.Publicly traded Hyperion currently leases about 200,000 sf in three Bay Area locations. It will begin vacating those spaces in the third quarter in favor of the former 3Com campus adjacent to Highway 237 at 5500 Great American Parkway. A company source tells GlobeSt.com there will be term remaining on all of its current leases and that two brokerage firms have been hired to sublease the spaces.Hyperion’s current leaseholds include its headquarters at 1344 Crossman Ave. in Sunnyvale, 4980 Great America Pkwy. in Santa Clara and the Spear Street Tower (1 Market St.) in San Francisco. In order, the buildings’ owners are Lamar Realty, Sobrato Development and Equity Office Properties. CB Richard Ellis has been retained to sublease Hyperion’s space in San Francisco and Santa Clara and Cornish & Carey has the sublease assignment for the company’s Sunnyvale headquarters.Prentiss paid $34.8 million for the 3Com campus in late May. In addition to the built space, which is fully improved, the purchase included adjacent land that can support another 230,000 sf of office development. Prentiss says that even if it signs no other leases, the Hyperion lease will provide it a 7.8% cash return on its basis in the buildings. The specific terms of the lease agreement were not released by the parties involved. However, reliable sources tell GlobeSt.com that the lease term is about 10.5 years and that the negotiated rate came in slightly below the asking rate. Cushman & Wakefield has been marketing the steel-frame buildings at $1.15 per sf per month, triple net–a rate that assumes a five- to 10-year lease and includes a $5 per sf tenant improvement allowance.Hyperion says it expects to take a restructuring charge of about $2 million during the quarter ending Sept. 30, when it plans to relocate the employees from its San Francisco facility to its current Santa Clara offices, a leasehold it assumed late last year when it acquired Brio Software Inc. It expects to take another $6-million restructuring charge the following quarter, when it moves onto the former 3Com campus.3Com developed the buildings in 1999 and then entered into a synthetic lease arrangement that has a three-year base term, two five-year extension options and an option to unwind the lease and repurchase the property for $83.6 million. 3Com reacquired the buildings in November 2001, according to public records. 3Com relocated its headquarters to Marlborough, MA in 2003. Its Santa Clara property was fully vacated this past February. When Prentiss went hard on the acquisition in early May, it handed the leasing assignment to the San Jose office of Cushman & Wakefield, which was representing 3Com in the sale and had been marketing the property for lease on their behalf as well. The brokers involved are Brad Martin, James Allsup, Rich Hardy, and Frank Liantonio.Martin tells GlobeSt.com that Hyperion and a couple of other prospective tenants had shown interest prior to Prentiss tying up the property, but it wasn’t until shortly after closing that Hyperion showed real intention. “They just happened to step up and say ‘we would like to get serious about it,’” says Martin. “So we worked very diligently to put the transaction together.”At the time of Prentiss’ acquisition, Martin told GlobeSt.com that while there’s upward of 50 million sf of office and R&D space available for lease in the area for a 31% vacancy rate, there is significantly less that is truly class A space. “Vacancy is probably only 15% if you take out all of the class B and C product, and there are only a handful of campus-style locations available,” said Martin. “We’re very well positioned.”