Legacy Reportedly Acquiring 488 Almaden for $100M

SAN JOSE, CA-Legacy Partners is reportedly under contract to acquire a vacant, 381,000-sf class A office building at 488 Almaden Blvd. from BEA Systems, multiple industry sources tell GlobeSt.com. BEA acquired the 17-story building in April 2007 along with the attached 1,100-slip parking structure for $135.3 million or $355 per sf. Built by Sobrato Cos. in 2002, the 17-story building has never been occupied. BEA had spent an additional $6.5 million renovating the building in preparation for a mid-2008 move-in when it halted work in March after it became clear it would be acquired by Oracle, according to SEC filings. The $8.6-billion transaction was consummated in April 2008; BEA put the building up for sale the next month through Eastdil Secured. The players directly involved either declined comment or could not immediately be reached for comment Friday morning.

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.