Janice Bitters | Commercial Real Estate
Buchanan Street Partners has purchased the Bayland Building near Levi’s Stadium in Santa Clara for $32.3 million, and its first order of business will be to upgrade the property with new amenities on-site and improved common areas, the company said Friday.
The seller, Sleepy Hollow Investment Co., had owned the 116,000-square-foot building at 2953 Bunker Hill Lane for more than two decades before the transaction was finalized last week.
At one time, the company touted itself as a long-term investor that is “able to effectively manage market fluctuations as a result of this approach,” according to its website, but the company has been selling off properties in recent months. Earlier this year, Sleepy Hollow also sold off 14 other buildings in the Bay Area to five different buyers for $130 million. The company was represented by Eastdil Secured’s San Jose office in the recent deal.
Representatives from Sleepy Hollow did not returns requests for comment Friday, but Robert Dougherty, partner at Buchanan Street, said in an interview Friday that as he understands it, the Bayland Building was among the last properties in Sleepy Hollow’s portfolio.
“What attracted us to the opportunity was that it was the last property in their portfolio, so we felt like we had a motivated seller on the other end of transaction,” he said.
The sale of the four-story building, which sits on a 3.61-acre lot on the north side of Bunker Hill Lane between Great American Parkway and Betsy Ross Drive, works out to about $278 per square foot or $8.94 million per acre.
The property also includes a two-story parking structure on-site, as well as surface parking that wraps around the building. The property comes with 461 parking spaces, or about four spots per 1,000 square feet of office.
Dougherty said the building, originally erected in 1987, is set to get new HVAC and other technical, back-of-house upgrades.
It’ll also get more contemporary cosmetic finishes throughout the building and new indoor and outdoor lounge areas. Buchanan Street will also be putting in a canopy over the entrance of the building, new landscaping and electrical vehicle charging stations.
The building is about a half mile away from Levi’s Stadium, near a growing number of office and retail options.
“That location is compelling,” Dougherty said. “We think that with the improved product we will be able to put forward – thanks to our renovations – it should be a very attractive property.”
The building has four tenants, though 60 percent of the space is taken up by semiconductor company Inphi Corp. Other tenants on the property are also tech companies, Dougherty said.
Though the active leases at the site aren’t very long-term, Dougherty said the planned improvements will make the building more attractive to both existing tenants and others when it is time to renew the agreements.
He also noted that the property is currently leasing at rates below market value for the area. Buchanan Street Partners plans to bump up those rents to be more in-line with the current asking rents in Santa Clara.
As of the end of last year, the average asking rent rate for Class A office space in Santa Clara was $4.52 per square foot, according to data released by CBRE, which will be managing the property.
One advantage that the Bayland Building may have over other office properties in the area is that it is multi-tenant, offering one of the few options for smaller tenants to scoop up space in Santa Clara, Dougherty said.
“If you are a 7,000- to 20,000-square-foot tenant, we present a pretty compelling option when a lot of the larger buildings are occupied by the tech behemoths,” he said.
The acquisition is Buchanan Street Partner’s first Silicon Valley purchase in about a decade. The company sold off its last property in the Valley in 2008, though it continued to own buildings in the mid-Peninsula area and in Marin County.
Looking forward, the recent Silicon Valley acquisition is not likely a sign that Buchanan Street will begin digging for more property in the area, Dougherty said.
“We are concerned about valuations in Silicon Valley right now,” he said. “But we are always on the lookout for that miss-priced asset.”
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