BioMed Realty buys Bay Area office complex, undeveloped land from Oracle for $160M
The complex has life-science conversion potential, while the adjacent swath of vacant land included in the deal can support 235K sf of new development
BioMed Realty acquired an office complex and a swath of adjacent vacant land from Oracle Corp. for $160 million, a deal that gives BioMed more than 200,000 square feet of existing space with life-science conversion potential and the opportunity to build a new campus next door.
At the end of August, BioMed, a Blackstone portfolio company, bought a three-building office property at 301 and 401 Island Parkway in Belmont and 501 Island Parkway in Redwood City for about $144.6 million, or about $630 a square foot, and 6.5 acres of vacant land next door for about $15.4 million.
The seller in the pair of separate transactions was Oracle, which had owned both the vacant land and the site of the approximately 229,000-square-foot office complex since the late 1990s, according to Old Republic Title records. The deals, which had not been previously reported, were recorded in the San Mateo County Clerk-Recorder’s Office on Aug. 31.
A BioMed spokesperson confirmed the information in the deed documents but said the company didn’t have additional information to share. An Oracle spokesperson declined to comment.
Oracle disclosed in a regulatory filing last December that it had changed its corporate headquarters from Redwood City, California, to Austin, Texas. The next month, the technology giant reportedly put the trio of Island Parkway buildings and the adjacent 6.5-acre site as well as a 17-story Class A office building in downtown San Jose on the market. Lane Partners, a Northern California commercial real estate firm, purchased the San Jose building and a surface parking lot across from it from Oracle for $155 million in May, later selling the parking lot to an affordable housing developer for $1.3 million.
For BioMed, the second-largest U.S. owner of life-science buildings, its purchase of Oracle’s Island Parkway complex and four undeveloped parcels next door may help create some breathing room in the Bay Area’s tight life-science real estate market. The vacancy rate for that type of space in the region was 5.6 percent as of August, according to Newmark’s 2021 mid-year life-science report.
In San Mateo County, which includes Belmont, Redwood City, and 18 other cities and towns, the vacancy rate for such properties was even lower — just over 3 percent at the end of the second quarter, according to Kidder Mathews.
However, under the city of Belmont’s zoning guidelines, life sciences isn’t an allowed use for either the site of the Island Parkway complex or the adjacent swath of vacant land BioMed acquired, Carlos de Melo, Belmont’s community development director, said in an interview on Tuesday. The company has provided the city with “draft language” that could potentially serve as an application to rezone the land underlying the office complex to accommodate life-science tenants, de Melo said. Those zoning changes could come in the form of changes to the text in Belmont’s General Plan and its zoning ordinance, although the exact scope of the company’s application is still being contemplated, de Melo said.
BioMed has approached the city about its plans for only the built-out portion of the properties it acquired, de Melo said. The company is looking to make tenant improvements to the existing structures at 401 and 501 Island Parkway, each of which offers 87,756 square feet, “for at least we know,” he said. It has not shared its vision for the 6.5-acre swath of land directly west of those buildings with the city, he said.
The Blackstone company describes the existing office complex along Island Parkway on its website as having “life-science conversion potential.” And because of a development agreement with the city of Belmont that was in place before it acquired the vacant swath of land next door, it has the option to build up to 235,000 square feet of new development on that land, according to a copy of the property’s offering memorandum. That entire developable amount can be just commercial space, de Melo said.
Greg Cioth, Paul Nelson and Nate Jones, who oversee Eastdil Secured’s San Francisco and Silicon Valley offices, led sales efforts for both properties. Cioth did not respond to requests for comment.