UPDATED, June 10, 5:45 p.m. PT: This story has been updated after The Real Deal spoke with a person with direct knowledge of the sale who said the sale price was about $65 million.
Ellis Partners has acquired a Class A office building in Menlo Park for about $65 million, a rare trade in one of the Bay Area’s most expensive submarkets for such properties.
The San Francisco-based investor and developer paid about $1,508 a square foot to buy the 43,082-square-foot building at 200 Middlefield Road, a broker with direct knowledge and no involvement in the sale told The Real Deal. That’s about $348 a square foot more than what seller TIAA Real Estate Account paid to acquire the property in 2014. It’s around the initial ask on the building — TIAA and Newmark, which handled the latest deal, were originally aiming for a sale in the mid-to-high $60 million range, a broker with indirect knowledge and no involvement in the transaction said.
Representatives of both Ellis and TIAA didn’t respond to requests for comment. Newmark’s Steven Golubchik confirmed to The Real Deal that he, Edmund Najera, Jonathan Schaefler and Darren Hollak of the firm’s Northern California capital markets team brokered the deal but didn’t answer additional questions.
Office buildings in Menlo Park seldom change hands. Asking rents for offices in the city are among the highest in both Silicon Valley and the adjacent South Peninsula region, which includes Los Altos, Menlo Park, Mountain View, Palo Alto, Redwood City and Redwood Shores, according to Newmark data. On Middlefield Road, they averaged $7.55 a square foot a month at the end of last quarter, Newmark data show. Within Silicon Valley and the South Peninsula, only Sand Hill Road and Menlo Park’s, Mountain View’s and Palo Alto’s downtowns had higher average office asking rents than Middlefield Road, a relatively small submarket totaling less than 1 million square feet, according to Newmark.
Because owners of that area’s office properties and those elsewhere in Menlo Park can charge such high rents, there’s less of an incentive to sell — especially when the city’s proximity to Stanford University and its reputation as a hub for venture capital firms are taken into account.
The sale of 200 Middlefield Road at around its initial pricing guidance could indicate that Menlo Park’s investment sales market is returning to its pre-pandemic heights. However, it’s difficult to extrapolate much from a single office trade there given how few and far between they are. Menlo Park office properties that hit the market for sale in the years leading up to the pandemic consistently sold at or above their pricing guidance. One such example was the sale of two of the first campuses on Sand Hill Road, the city’s most expensive office submarket. In January 2020, investor and developer DivcoWest paid more than $1,908 a square foot to acquire the properties at 2700-2770 and 3000 Sand Hill Road, which collectively total about 320,000 square feet.
Another recent example was Invesco Real Estate paying $1,800 a square foot in 2015 for a 49-percent stake in a 133,000-square-foot complex on Sand Hill Road. The deal valued the asset at about $240 million, higher than what media outlets previously reported. The price was probably inflated somewhat by the deal being a partial interest sale, which wouldn’t trigger a property tax reassessment, the Silicon Valley Business Journal reported in 2014.
The building at 200 Middlefield Road is 87 percent leased to several tenants and co-anchored by private equity and venture capital firms, Ellis said in a press release. The release didn’t disclose those firms’ names, but a partial list of occupants on the property’s online listing and photos of the building’s entrance indicate the anchor tenants are Blackstone and Summit Partners. Its other tenants include cloud software company OptumSoft, AgriWorld Exchange and Rubicon Technology Partners, according to Newmark’s property listing.
Read more
Commercial
San Francisco
Ellis Partners, Intercontinental submit early-stage plans for Oakland office tower