Another Downtown San Jose trophy tower is about to have a new landlord.
Equity Office is selling the 16-story Ten Almaden to KBS Real Estate Investment Trust III for $116.7 million, according to a Securities and Exchange Commission document filed this month. That works out to roughly $377 per square foot for the 309,255-square-foot building - a healthy price for the central business district.
The transaction is expected to close in early December, according to sources outside the deal. I first wrote it was coming to market back in September.
The tower - considered among the top four or five buildings downtown - is the latest to sell in the submarket. Since December 2012, 50 West San Fernando St., 225 W. Santa Clara St., 60 South Market, 303 Almaden and 160 W. Santa Clara have all traded hands.
The deals have come after years of very low investment-sale activity downtown, suggesting institutional buyers are seeing the possibility for upside in San Jose's downtown, where prices are much less than red-hot "gateway cities" such as San Francisco.
Built in 1991 by legendary developer William Wilson, Ten Almaden was 89-percent leased to 15 tenants as of Nov. 19, according to the filing. Those tenants had an average of 4.7 left on their leases, the filing said. The rent roll includes Move.com, Apigee, Kidder Matthews, Loring Ward, Malwarebytes and Turner Construction Co., among others; Focus Business Bank is on the ground floor. The building is also notable for being the only tower downtown with an outdoor pool.
Ten Almaden's fortunes today are a far cry from a couple years ago, when the departure of PwC for 488 Almaden left a 160,000-square-foot hole in the occupancy, noted Cassidy Turley's Erik Hallgrimson, who is on the leasing team with Bob Simpson and Todd Beatty.
"We've been able to attract a variety of tech tenants from other parts of the Valley to downtown," he said. "That's certainly a trend we see continuing going forward. Tenants are really focused on amenities and transit. And it's a great building at the best intersection in downtown."
This sale is technically the first time that the building has sold as a single asset; EOP acquired Ten Almaden as part of its huge acquisition of Cornerstone Properties Inc. in 2000. Cornerstone had acquired William Wilson & Assoc. two years prior.
With the sale, Equity Office no longer has an asset downtown. The huge landlord, which has been in sell-off mode for the last two years or so, sold the 350,000-square-foot 225 W. Santa Clara St. (which faces Ten Almaden) last December to Principal Real Estate Investors. Principal paid about $138 million, or just around $394 per square foot.
KBS REIT III is a public non-traded REIT based in Newport Beach, Calif. and a unit of KBS Capital Advisors LLC. KBS REIT III generally invests in Class A office properties in major employment centers with stabilized occupancy and predictable cash flows, according to a prospectus.
KBS REIT II, a separate investment vehicle, owns a couple Silicon Valley properties, most notably the 610,000-square-foot Corporate Technology Center in north San Jose, which it bought (also from Equity Office) for $239 million in April 2013.
KBS and EOP declined to comment on the sale before it closes. HFF, which was marketing the tower, declined to comment at this time.
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