$2,250 psf for Palo Alto HQ of American Express VC arm

Among city's priciest per-square-foot office sales over past five years, second most expensive during pandemic

San Francisco /
May.May 03, 2022 03:21 PM
Windy Hill's Jamie D'Alessandro and Amex Ventures’ Matt Sueoka with 431 Waverley Street (Windy Hill Property Ventures, American Express Courtesy of Matt Sueoka, Google Maps)
Windy Hill Property Ventures’ Jamie D’Alessandro (left) and Amex Ventures’ Matt Sueoka with 431 Waverley Street (Windy Hill Property Ventures, American Express Courtesy of Matt Sueoka, Google Maps)

A 16,000-square-foot building in Downtown Palo Alto that serves as the headquarters of the venture capital arm of American Express has traded for $2,250 a square foot, one of the city’s priciest per-square-foot office sales over the past five years.

A pair of Menlo Park-based limited liability companies paid $36 million late last month to acquire the property at 431 Waverley Street and 430 Kipling Street from Windy Hill Property Ventures, according to public records. While the buyers’ names — Deerfield Waverley LLC and Deerfield Ellis LLC — indicate that Menlo Park-based Deerfield Realty was behind the purchase, company president TJ Bianchi said that isn’t the case.

Deerfield Realty manages properties but does not and never has owned any real estate, Bianchi told The Real Deal on Tuesday. He didn’t respond to a question on the buyers’ identities.

Windy Hill acquired the site of Amex Ventures’ base for $11.5 million, or about $718 a square foot, in March 2014, meaning the property’s value has more than tripled since then. The Downtown Palo Alto-based firm didn’t respond to requests for comment.

The deal is the sixth-most expensive one on a per-square-foot basis out of 22 office sales in Palo Alto from the fourth quarter of 2017 through February, according to Real Capital Analytics data. It’s the city’s second-priciest sale on a per-square-foot basis for such properties since the start of the pandemic, behind only a 3,500-square-foot Class C building downtown that sold for $2,879 a square foot in April 2021, the data show.

It shows some investors are still willing to pay top dollar for single-tenant offices in Palo Alto’s core while highlighting the disparity in perceived value between buildings in the area that are occupied and those that aren’t. In February, Walnut Hill Group paid $54 million, or $1,556 a square foot, to buy a vacant Class B building at 379 Lytton Avenue, a one-minute walk from Amex Ventures’ office. Walnut Hill plans to spend more than $200 a square foot on renovations to reposition the 37-year-old structure to Class A offices, one of the brokers who marketed it for sale told The Real Deal in February.

The building that now hosts Amex Ventures previously had an upscale Mediterranean restaurant named Zibibbo that had been there for 17 years as its lone tenant. Zibibbo closed a month after the property changed hands in 2014, allowing then-owner Windy Hill to turn the restaurant into office space.

Less than three months into the renovation, Amex Ventures signed a 10-year lease to occupy the entire property, the Silicon Valley Business Journal reported in June 2014. The company agreed to pay $7.45 a square foot a month in rent at the start of its term, well above downtown’s average office asking rate of $6.17 a square foot at the time, the Business Journal said. Average rates downtown have since risen to $8.84 a square foot, according to Newmark data.

It’s unclear if Amex Ventures plans to renew its lease or vacate the property once its term ends — a spokesperson didn’t respond to a request for comment. Established in 2011, the company oversees more than $1 billion and had invested in 89 companies as of February. It was among the first to back then-startups Stripe and Instacart which are now worth tens of billions of dollars, according to Fortune.

Palo Alto’s office market, meantime, is starting to show some signs of recovery amid the looming possibility of a new tax on tenants landing on the November ballot. Since hitting a pandemic high of almost 18 percent in the first quarter of last year, office vacancies have decreased every quarter since then to 14.1 percent at the end of March, Newmark data show. Net absorption was positive last quarter, the fourth straight time that’s occurred after happening just once over the previous two years, according to Newmark.

Challenges remain, though, especially downtown: There are about 130 empty offices in the area alone compared with about 10 vacancies there during a “typical” time, Jon Goldman of Palo Alto’s Premier Properties told The Real Deal last month, citing CoStar figures.





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