The seller is officially Great American Associates LLC, an entity controlled by New Urban Properties, formerly Sagamore Equities. Great American Associates acquired the property from Whitehall in 2000 for $48 million, according to local sources. New Urban principal Tom Owens could not be reached for comment.
Constructed in phases between 1982 and 1984, Great America Plaza sits on 9.5 acres at 5200 Great America Pkwy., opposite the Santa Clara Convention Center, Tech Mart and the Hilton Hotel. Tenants include Lucent Technologies, Ricoh, Danka and TeleCIS. The vacancy is mostly space given back by Riverstone networks, which leased all of the larger building before filing for bankruptcy and ultimately being acquired Lucent. Lucent now leases half the space that Riverstone once did.
Jones Lang LaSalle broker Michel Seifer has the disposition assignment. Seifer tells GlobeSt.com that with vacancy dropping and lease rates on the rise in the Silicon Valley, that asset presents the new owner with a solid value-add play.
The Silicon Valley office market saw 932,919 sf of net absorption in the second quarter, dropping the overall vacancy rate to 16.02% from 17.48% at the end of the first quarter, according to Colliers International. The average start rent for office leases in Q2 was $2.11 per sf, fully serviced, up from below $2 in previous quarters. Vacancy in the Santa Clara was 12% at mid-year and on a downward trend, according to Cushman & Wakefield.
"We haven't seen significant rent increases in the Santa Clara submarket but, given where vacancy is headed and the amount of activity, it's only a matter of time," Seifer says. "The expectation is that we will see double-digit rent increases over the next couple of years."
Couple that with the fact that the average in-place rates are 10% to 15% below market ($1.85 per sf), and that all existing leases expire over the next two to three years, and "it's a strong re-leasing play," Seifer says.
It's also a potential redevelopment play. "Clearly there are assets along Great America Parkway that have denser coverage," he says. "You would probably have to tear down one or more buildings."
A $40-million sale price translates to about $179 per sf. Just around the corner from Great America Plaza, Cornish & Carey is selling Lake Marriott Business Park, a comparable, 400,000-sf low-rise office campus owned by Equity Office Properties Trust. That sale price is rumored to be in the $190- to $200-per-sf range.
Great America Plaza is being offered an unencumbered, 100% fee simple basis. Bids likely will be due by the middle of next month. The goal is to close the deal before the end of the year.
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