ACORE Lends $314M in Silicon Valley Office Deal
By Matt Grossman May 8, 2019 3:08 pmreprints
Harvest Properties and Invesco have sealed up a $313.8 million acquisition and construction loan from ACORE Capital for an office complex the duo is buying in Northern California, Commercial Observer can exclusively report.
The five-year mortgage will fund the buyers’ purchase and development of an existing office complex in Sunnyvale, Calif., a city in the middle of Silicon Valley about 40 miles southeast of San Francisco. Included in the project, which the investors have dubbed Catalyst, are three existing office buildings and one parcel of vacant land, at 684 West Maude Avenue, 870 West Maude Avenue, 810-820 West Maude Avenue and 470 Portrero Avenue. The plan is to tear down two of the present office buildings and build as many as three new ones, creating a site with three newly built office structures and one older building.
Harvest and Invesco paid $165.5 million in the acquisition, according to Connect California, a commercial real estate website: $120.5 million for the existing buildings and $45 million for the land.
An HFF team led by Brandon Roth, Bruce Ganong, Peter Smyslowski and Bercut Smith brokered the debt deal on behalf of Harvest and Invesco.
“This was a large complicated transaction with many moving pieces that needed to close on an acquisition timeframe,” Roth said in a statement. “ACORE won the financing opportunity because [it] underwrote the project quickly and structured a deal that provided Harvest and Invesco the ideal combination of a low cost of capital with moderate leverage and plenty of flexibility.”
Kyle Jeffers, an ACORE executive who worked on the deal, agreed with that assessment.
“I think we were able to put together a creative solution,” Jeffers said.
This being Silicon Valley, some of the biggest names in technology, like Google, Facebook and LinkedIn, already have their headquarters campuses hard by the Catalyst office site. (Google and Facebook are in nearby Mountain View and Menlo Park, respectively, while LinkedIn’s HQ is a short distance away in Sunnyvale.) But the companies are still snapping up new office space at a rapid clip, Jeffers said, betraying few concerns about the project’s lease-up.
“You have an incredible number of high-quality tenants continually taking space” in Silicon Valley, he said. “They’re all looking for larger floor plates.”
To that end, the new buildings, planned for three or four stories each, will emphasize contiguous and flexible office space, as per Jeffers. That will play well in Sunnyvale, he said, where the market for office buildings of that design is especially taut.
“If you just look at the statistics, Sunnyvale is a market with very little vacancy. And the vacancy it does have is not in big block space.”
Invesco, based in Atlanta, and Harvest Properties, headquartered just across the San Francisco Bay in Oakland, are now repeat ACORE borrowers in Silicon Valley. Last August, ACORE lent the pair $182.6 million to buy Peninsula Office Park in San Mateo, Calif., about 20 miles north of Sunnyvale. There, too, the sponsors are renovating their buildings to bring them up to snuff for top-tier tech tenants.
Representatives from Harvest and Invesco did not immediately respond to inquiries.