Last month, CarrAmerica acquired a 142,000-sf building at 350 E. Plumeria for $130 per sf and instantly added value by leasing the whole thing to Netgear. The wireless router maker signed a 10-year lease, $30-million deal that commences in April 2008. The rental rate starts (in the 10th month) at $1.50 per sf per month and ramps up to $1.95 over the course of the lease, according to SEC filings.

Around the same time, CarrAmerica paid $220 per sf for a 100,000-sf building that is part of a 500,000-sf campus on Holger Way in San Jose, the rest of which it acquired over the past few years for approximately $130 per sf. Shortly thereafter, it renewed and expanded the main tenant, Ericsson, by 176,000 sf. The telecommunications giant now occupies 320,000 sf, some of which it inherited from Redback Networks, which it acquired last year for $2.1 billion. The average lease rate on the deal is said to be north of $2 per sf.

"It's easier for companies if their space requirements can be taken care of by existing facilities or expansions that occur near their existing locations," says another local source. "No one likes to move, and Peatross has been very adept at taking advantage of that, especially since construction costs are higher and available campus properties are becoming much harder to find."

John Yandle, an SVP and manager with the brokerage firm Cornish & Carey, which was involved in some of the deals, says CarrAmerica has separated itself from the pack by being creative in its deal making. "For example, on the [Ericsson] deal, in order to create the space for that company's expansion, CarrAmerica had to acquire another building before Ericsson had signed a lease agreement," he says. "They were willing to do it because they know the market."

Netgear signed its deal on faith that CarrAmerica could execute its plan for turning a second-generation building that needed a lot of rehab work into a nice place to work. "The building hasn't been fixed up yet," Yandle says. "It was CarrAmerica showing them examples of things that it has done elsewhere that gave them the confidence to sign the lease."

Yandle says CarrAmerica's ability to create real value will help it in the long run. "There's been a lot of buying and selling of properties in recent years and all that works and everybody for the most part has come out looking good thanks to a rising market, but the time has come where we've now reached the peak of the rising market and it's time for true developers to come out and do something to buildings to create a better product than they bought and to buy it smartly enough to have the money to do it," Yandle says. "That's the real challenge in the Valley right now."