KBS Real Estate Investment Trust III has stepped into the Silicon Valley market with the acquisition of Ten Almaden, a 309,200-square-foot office property in downtown San Jose, Calif. KBS REIT III acquired the Class A asset from Equity Office Properties for $116.7 million.
As noted in a third quarter report by commercial real estate services firm Kidder Mathews, Silicon Valley's prominence as the hub of innovation and entrepreneurship has made it one of the most in-demand real estate markets in the U.S., and growth is anticipated for many quarters to come. It's an aggressive market for investors, so it's nice to have friends.
"It is always difficult to buy quality real estate, but an asset like Ten Almaden is even more difficult because it meets the criteria of most real estate advisors-urban, amenity rich, below replacement cost, Class A and in one of the strongest markets in the country with continued strong tenant demand," Rodney Richerson, regional president with KBS, told Commercial Property Executive. "We believe our prior performance history with the seller gave us an edge in getting awarded the deal; they knew we would close on time at the agreed upon price."
Developed in 1989 at the intersection of Almaden Blvd. and Santa Clara St., Ten Almaden, boasts a prime location just outside of the prestigious Innovation Triangle and is widely considered one of the best office destinations downtown. The 17-story tower is presently 89 percent leased, with limited lease rollover and a long and strong roster of tenants that includes Move.com, tech startup Apigee Inc. and investment manager Loring Ward, which signed a deal for 42,600 square feet during the second quarter.
KBS REIT III plans to capitalize on Ten Almaden's central location and flexibility to reel in new tenants, and the new owner will also renovate the property, which had its last makeover just four years ago.
"The asset is very well positioned, but we have plans to upgrade some of the existing amenities as well as add some new ones," Richerson said. KBS REIT III anticipates investing roughly $1 million to $2 million in the common areas and amenities, including a new conference facility.
It's been a busy year for KBS REIT III, which launched in 2011. The company's lengthy list of transactions over the last 12 months includes the $170.5 million acquisition of the approximately 427,000-square-foot 222 Main office tower in Salt Lake City, and the purchase of 171 17th Street, a 500,000-square-foot office building in Atlanta, for $132.5 million.