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University Circle Deal Could Top $675 Per SF

PALO ALTO, CA-Wells REIT II's purchase of 1900, 1950 and 2000 University Ave., a three-building complex here containing 451,000 sf, is scheduled to close sometime between now and early November. The sale price could hit $306 million--$678 per sf--if the seller can lease up vacant space in the building before next May.

By Brian K. Miller | Updated on August 30, 2005

PALO ALTO, CA-Wells REIT II is buying 451,000 sf of rentable office space here for as much as $306 million or $678 per sf. The deal for 1900, 1950 and 2000 University Ave., a three-buildings complex here, is scheduled to close sometime between now and early November, according to an August SEC filing.

The agreement calls for a sale price of $293 million unless the seller procures qualified leases for vacant space on or before May 1, 2006. The earn-out provision, which is based on a predetermined formula, shall not exceed $12.9 million, according to the agreement. Vacancy in the building is reportedly around 15% or about 60,000 sf.

Fred Beaubien, a senior director with Cushman & Wakefield in San Jose, wouldn’t speak to the soundness of the deal because he did not know specifics, such as the cap rate. “The only thing I can tell you is there is a huge demand for quality real estate,” he says. “Cap rates have ranged from 5.6% to 8% depending on the quality of the real estate and where the [in-place] rental rates are relative to market.”

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