Ivanhoe Cambridge and its partners DivcoWest and TPG Real Estate continue to buy up potentially valuable space in Silicon Valley with the recent acquisition of another three properties in North San Jose, Calif.
MWest Properties snapped up 12 R & D and corporate office buildings totaling 825,000 square feet in its latest purchase. The terms of the transaction were not disclosed.
MWest managing director Justin Wesley said in a release the new properties “create tremendous synergies within our existing platform and significant value-add opportunities.”
Other California acquisitions
In December 2012, Ivanhoe Cambridge, DivcoWest and TPG Real Estate acquired most of the assets owned by Mission West Properties for approximately US$400 million and formed MWest.
The company’s holdings now encompass more than 7.1 million square feet of commercial office and R & D space across 85 properties in the Silicon Valley and San Francisco.
Earlier this year, Wesley told the Silicon Valley Business Journal MWest planned to invest in the Mission West building portfolio and to upgrade the buildings from class B to class A properties.
“This is real,” Wesley told the business journal, which noted MWest intends to spend more than $100 million on improvements.
The journal cited several challenges MWest may face. At the time of acquisition, the properties were roughly 60 per cent occupied, many of which the publication described as being located in “lagging regions of the Valley.”
MWest’s refurbishing of the buildings would be beneficial for attracting the next generation of tenants.
Double-digit vacancy rates
Securing tenants to lease the roughly 1.1 million sq. ft of vacancy the business journal says is evident in MWest South San Jose buildings may also be a challenge. According to the latest Q3 2013 Silicon Valley R & D Market Snapshot from U.S. commercial real estate firm Cassidy Turley, South San Jose’s vacancy rate is 20.1 per cent.
The business journal said vacancy rate in North San Jose, the site of MWest’s latest purchases, is 15.3 per cent.
Generally, Cassidy Turley called the Silicon Valley market “a mixed-bag,” citing consistent leasing activity over the last six quarters. It noted large blocks of space recently became available in both South and North San Jose and in Sunnyvale.
Cassidy Turley reports that at the close of Q3 2013, total R & D availability in the Valley was 23.5 million sq. ft., of which 2.75 million sq. ft. was sublease space.
Ivanhoe Cambridge is a real estate subsidiary of the Caisse de depot et placement du Quebec, one of Canada’s leading institutional fund managers. Through its multiple subsidiaries, Ivanhoe Cambridge’s assets in more than 20 countries were valued at more than $35 billion Cdn as of Dec. 31.
DivcoWest is a vertically integrated operating company that provides asset, property and construction management and leasing services, with offices in the San Francisco Bay area and Boston.
TPG Real Estate is the real estate platform of TPG, a leading global private investment firm with $55.3 billion of assets under management.