Latest on Silicon Valley’s cutting edge: Industrial-to-educational conversion

A Silicon Valley prep school has spent $28 million to acquire an industrial building in Palo Alto, with plans pointing to a second campus in the city.

Palo Alto-based Silicon Valley International School paid $779 a square foot to buy the 36,321-square-foot building at 1066 East Meadow Circle. The nonprofit beat out multiple life science companies and some residential developers in the process, Dutra Enterprises’ Zaheer Siddiqui, the property’s sole listing broker, told The Real Deal. The seller was Trudy Widl, according to a deed filed with the Santa Clara County Clerk-Recorder’s Office on June 9. The 2.3-acre site last sold for $2.5 million in 1996, according to data from Reonomy, a commercial real estate analytics firm.

Although the school didn’t respond to requests for comment, Palo Alto city documents indicate that it plans to turn the 1970s-era East Meadow Circle building into a site for educational facilities. The Palo Alto City Council voted in April to approve the issuance of an up-to-$50 million tax-exempt loan by the California Municipal Finance Authority for the school to finance the acquisition, improvement and maintenance of two educational and administrative buildings in the city. One of them, at 151 Laura Lane, serves as the school’s campus for kindergarteners through fifth graders. The other is the East Meadow Circle property, which became vacant in March after its sole, full-building tenant, Stangenes Industries, moved out, Siddiqui said. Much of the loan — up to $44.6 million — would go toward acquiring and converting the building to make it suitable for educational use, according to city documents. The rest would go to financing and refinancing certain costs of upgrading the Laura Lane campus, the documents said.

In connection with the deal, the school secured an up-to-$25 million loan from the finance authority, according to a deed of trust filed with the Clerk-Recorder’s Office on June 1. It’s somewhat of a complex arrangement because, while the authority is providing that amount, the source of the money is from proceeds of separate loans it’s obtained or in the process of getting from Silicon Valley Bank. It’s unclear if the authority, which didn’t respond to requests for comment, has provided the school with the rest of the loan that the City Council approved in April.

The deal marks the second time in the past two months that a school has acquired a building in Silicon Valley. In April, Avenues: The World School, an exclusive New York-based for-profit enterprise, paid $33 million for an office property in San Jose that’s next to a 12-acre campus it intends to open next year.

Silicon Valley International School is relatively less posh: Annual tuition ranges from $33,350 for preschoolers to $39,900 for high school enrollees, compared with Avenues’ $62,700 for students at its New York City campus. However, its enrollment of 456 isn’t meager.

It managed to beat out life science users and residential developers in becoming the East Meadow Circle building’s new owner, paying almost 9 percent over the property’s $26 million asking price to do so.

Students of the school, which is part of a worldwide network, choose between French, German and Chinese language programs in addition to courses taught in English, a multilingual education system that forms the heart of its curriculum.

Besides the Laura Lane site and the East Meadow Circle building about three miles south, the nonprofit operates a campus in Menlo Park for those in preschool and pre-kindergarten, middle and high school. It employed 184 people in 2020 and had almost $24 million in net assets that year, up from almost $19 million in 2019, according to its latest Form 990.

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