Legacy's purchase price is expected to come in somewhere around $100 million, one local investment broker familiar with the transaction tells GlobeSt.com. Add in the $15- to $20 million the company will need to spend on tenant improvements and its cost rises above $300 per sf, which is well below replacement cost but appropriate given the current class A asking lease rate in Downtown San Jose, which is approximately $33 per sf, and the fact that it could take some time for Legacy to lease up the building given the market's 20% vacancy rate.

Regardless, local investment and leasing brokers tell GlobeSt.com it behooved Legacy to make sure it was the high bidder for the property because it is the largest office landlord in Downtown San Jose with more than 1 million sf. With 488 Almaden, that number will rise to nearly 2 million sf, or approximately 22% of the overall market and a larger share of the class A market. Local leasing specialists tell GlobeSt.com that Legacy could not afford to have someone else acquire the property at a discount and then lure tenants away from existing and planned Legacy buildings with lower rents. Bids for the asset reportedly came in as low as $200 per sf.

Legacy owns several Downtown San Jose assets including Riverpark Towers, where it in the midst of adding a second 300,000-sf office building on a speculative basis. Its other Downtown assets include Almaden Financial Plaza and Horizon Center. Vacancy in the 3.5 million-sf class A office market in Downtown San Jose eclipsed 20% in the second quarter due to approximately 300,000 sf of negative net absorption, according to Cornish & Carey Commercial.