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445,000-SF Leasehold Changes Hands

SAN JOSE, CA-Ciena Corp. pays M&M Real Estate Control & Restructuring LLC $53 million to assume its lease obligation for five buildings here owned by Mission West Properties.

By Brian K. Miller | Updated on August 20, 2007

SAN JOSE, CA-Mission West Properties Inc. says Ciena Corp. has shifted its obligation for a five-building, 445,000-sf leasehold here to M&M Real Estate Control & Restructuring LLC at a cost of $53 million. Mission West, the owner of the buildings, says the lease runs through June 30, 2011. The $53 million includes the cost of certain personal property M&M acquired from Ciena as part of the deal.

As a result of the transaction and M&M Real Estate being considered a variable interest entity, Mission West says it will record a net lease termination fee of $45.35 million this quarter. In addition, Mission West will record restricted cash for the balance of the rental obligation due from M&M, and a liability of $7 million related to M&M’s obligation under the terms of the lease to complete certain leasehold improvements in two buildings housing approximately 164,000 sf of unimproved space.

Mission West manages 110 properties totaling approximately 7.8 million rentable sf, which includes approximately 894,000 rentable sf in 17 buildings that are in the process of being rezoned for residential development. Last week, the company revealed that that its previously announced $1.8-billion ($13.55 per share and limited partnership unit) acquisition by an undisclosed private equity firm is unlikely to close because the buyer’s primary and second lenders have withdrawn from the market. Mission West said it has been in touch with three other possible acquirers that have internal sources of financing and had previously expressed an interest in the company.

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