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March 04, 2015

Burlingame Point office site sells to Asian investment group for $48M

Silicon Valley Business Journal

Nathan Donato-Weinstein

In a deal that will bring new international companies to the north Peninsula, an Asia-focused investment group has closed on Burlingame Point - one of the largest approved office development sites in the region.

The buyer, a Chinese investment group, paid $47.7 million for the 18-acre site at 300 Airport Blvd., according to public tax records. The deal - which has been widely expected in the market for months- sets the stage for the most significant office project to rise in Burlingame in years. The seller was an affiliate of San Francisco-based Millennium Partners, which received approvals for the 767,000-square-foot project in 2012.

"This is an underutilized gem of a property in Burlingame that's been sitting vacant for years and years," City Manager Lisa Goldman told me. "We're looking forward to having a catalyst out there that will bring in office uses, bring people to the bay front."

The private equity firm H&Q Asia Pacific is involved in the deal, according to sources who have been tracking the transaction. The firm has invested in numerous Asian companies and has offices around the world, including Palo Alto. H&Q is an offshoot of the storied Hambrecht & Quist investment bank that was involved in the IPOs of Apple Computer, and Genentech.

A major investor in the purchase is Kylli Inc., a subsidiary of Genzon Group, two sources with knowledge of the deal told me. Genzon is a Shenzhen, China-based business venture focused on pharmaceuticals and real estate, including golf courses. Their biggest deal locally is the $350 million acquisition in 2014 of 225 Bush St. in San Francisco.

Founded in 1986, H&Q Asia Pacific has managed more than $2.7 billion in capital and has invested in more than 400 companies, according to its website. It's led by chairman and founder Ta-lin Hsu, a former IBM executive who has deep roots both in America and Asia. The investment group intends to build out the project, using it as a landing pad for companies in Asia to come to the U.S. and grow here, according to industry sources familiar with the deal. H&Q's investments include companies in biotech, software, hardware - even airlines and breweries.

The deal comes amid increased real estate investment in the Bay Area by Chinese investors and their U.S. subsidiaries. This week, my colleague Cory Weinberg wrote about a Chinese-funded group picking up residential development sites in San Francisco; the same firm has been active in San Jose.

Yet the Burlingame transaction is different because it is commercial, not residential, and it is being targeted to help Asian firms grow in the Bay Area. The news comes the same day that China's Alibaba announced a new data center in Silicon Valley.

"This is the first major commercial development to be done by a Chinese investor group," said Skip Whitney, who leads the Kidder Mathews China Services Group. "Traditionally, Chinese investors have been looking for residential. To me, it says they're willing to take more risk in other product type than just residential."

It's unclear when the project could break ground, how it would be phased or who tenants might be. Robert Shen, managing director of H&Q Asia Pacific in Shanghai - who is listed as the agent for service of process on the acquiring LLC - didn't immediately return an email.

Sean Jeffries, a Millennium executive vice president, wasn't immediately available for an interview. CBRE senior vice presidents Jonatan Moeller, Doug Beck and Meade Boutwell are the listing agents for the project. Moeller didn't immediately return a phone call.

The complex is approved for office, life science, retail and restaurant uses in four buildings ranging from five to eight stories. A two-story amenities building and a five-level parking structure are also on tap.

City officials have long thought of the site - a former drive-in theater that closed decades ago - as an opportunity to boost Burlingame's commercial brand. The city's largest private employer is United Natural Foods Inc., with about 1,160 workers, according to Burlingame's 2013 annual financial report. Sysco, with 545 employees; ECC Remediation Services Corp., at 500; and Berkeley Farms, with 400, round out the top 5. Burlingame's market for Class A office is relatively small, with a Class A building base of only about 760,000 square feet, according to Colliers International. Vacancy for all office types in the fourth quarter was just under 10 percent.

Burlingame Point was designed by DES Architects + Engineers, the Redwood City firm that has carved out a niche for these large, master-planned campuses. The architect has also done all the work on the Jay Paul Co.'s campuses in Redwood City and Sunnyvale. This will be yet another major office complex near the San Francisco Bay off of Highway 101 at a time when several others are in the pipeline. Jay Paul is working on a massive, 1.3 million square foot complex at 101 and Seaport Boulevard. Jay Paul is also under construction on a 1.9 million square foot campus in Moffett Park, called Moffett Place, which has been leased by Google.

To combat increased traffic, Goldman told me that the project would include increased shuttle service to and from the Millbrae multi-modal transit center. The owner will also make improvements to the Bay Trail.

For the full story, go to Silicon Valley Business Journal.

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