(For more retail coverage, click GlobeSt.com/RETAIL.)
SAN JOSE, CA-Bixby Land Co. has acquired a fully leased 302,000-sf R&D complex here for $70 million as part of an effort to reshape its portfolio. The Newport Beach-based private REIT is shedding its 18-property retail portfolio and exchanging them for industrial assets.
The San Jose R&D complex, Legacy Tech Center, is Bixby's first industrial product in Northern California. Built in 2000, the center has five R&D buildings that are 100% leased. Tenants include Tivo Inc. and Foundry Networks. The seller was WIX/NSJ Real Estate LP.
Bixby Land Co. CEO Bill Halford tells GlobeSt.com that while the Silicon Valley on its face seems to have high vacancy when you look behind the numbers much of the perceived vacancy is really in older product. "For product built in the last eight to 10 years, vacancy is lower and there is meaningful rent appreciation."
The tenant rollover at the complex is evenly distributed over the next six years, Halford says. If the market recovery continues, as leases expire, the company will be able to achieve higher rents. "We think that on a five-year hold, on an un-levered basis, the property will produce an IRR of 12% to 13%," Halford says.
The money from the sale of the retail properties will be invested in both core- and value-add industrial properties and also may be spent on raw land for ground-up developments. The properties primarily will be located in California but the company also is looking in Arizona and the Northwest.
The switch is in line with the company's strengths. "Our core management team's expertise is not in retail," Halford says. "The team we've brought on board--particularly our vice president of acquisitions and development, Mike Severson--is very familiar with the tech corridor in Northern California and we plan to leverage that experience."
All of the Bixby's retail assets--15 smaller properties ($1 million to $6 million) and three larger properties ($20 million)--will be sold over the next three or four months. The sales are expected to bring in about $100 million. Todd Goodman of CB Richard Ellis has the marketing assignment.
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