Whitehall Shops Calif. Complex With Upside

A Whitehall Street Real Estate fund is pitching a Silicon Valley office complex to both core and core-plus investors.

The 469,000-square-foot Central Research Park in Sunnyvale, Calif., is expected to attract bids of about $130 million, or $277/sf. The property, in one of Silicon Valley’s most-desirable submarkets, is 100% leased, making it a probable target for core buyers.

But leases on about half of the space roll over within four years. That provides potential upside, because some investors think Silicon Valley is headed for another dramatic spike in rents. If that happens, new leases could be signed at higher rents. CB Richard Ellis has the listing.

The eight buildings at Central Research Park, built between 1977 and 1984, contain a mix of traditional office and research-and-development space. Despite its age, market players consider the complex Class-A because it has undergone extensive renovations. Since 2000, owners have poured about $48 million into the buildings.

Whitehall Street, Goldman Sachs’ fund operation, bought the property for $118.5 million in November 2006 from Carlyle Group of Washington. Archon Group, a Goldman subsidiary in Irving, Texas, manages the complex.

Central Research Park is at the intersection of Central Expressway and North Mary Road, just off the Route 101 freeway about midway between San Jose and Palo Alto. The buildings range in size from 25,000 sf to 87,000 sf. Tenants include Boeing, Dell, Juniper Networks and Synopsys.

The high-tech industry has fueled a rebound in Silicon Valley’s office market, which took a beating in the downturn. At the market bottom in 2009, the occupancy rates plunged to less than 80% overall and to 50% in some submarkets. But renewed hiring by tech firms has sparked dramatic improvement. Overall occupancy is just under 85% now, after more than 5.5 million sf was leased in the first half of the year, according to CB. Sunnyvale’s occupancy rate stands at 88%, and capitalization rates have dropped below 6% for buyers of newer Class-A buildings.

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