Lane Partners and Walton Street Sell Apple-leased Buildings

JUNE 18, 2015

Lane Partners and capital partner Walton Street Capital took a risk back in 2010 when they bought a collection of buildings — the former Maxim Integrated Products campus — in Sunnyvale. After all, the real estate market was still in recovery mode as the economy lumbered out of recession.

Fast forward to this week, and the joint venture sold the project at a 400-percent price-per-square-foot increase, not accounting for renovation costs. The 262,000-square-feet, six-building campus traded for about $117 million, or roughly $446 per square foot, according to public records. Lane and Walton paid about $90 per square foot for the campus in late 2010.

The run-up in price reflects strong credit of the tenant — Apple Inc. is in about 240,000 square feet — as well as the amount of capital out there looking for well-leased assets to buy.

“On the sale side, it shows we repositioned the project and it was an appealing asset for institutional-type buyers,” said Scott L Smithers, managing principal for Lane Partners. “That was our precise business plan, so it’s gratifying to see that play itself out.”

The buyer was a fund advised by CBRE Global Investors, the Los Angeles-based investment advisor confirmed on Wednesday. The company declined to disclose more details about the fund. A source with knowledge of the deal say that the buyer is expected to achieve an initial cap rate, or measure of yield, in the range of about 5.7 percent.

“The property drew a lot of interest, not only from domestic but also off-shore buyers,” said Gerry Rohm, senior managing director at HFF, who marketed the property with David Dokko. “That’s because of quality and location and proximity to the Apple headquarters, as well as the fact that this is a mission-critical property for them.

“This demonstrates Sunnyvale is considered a highly sought-after, core market,” he said.

If you feel as though you’ve read this story before — Lane Partners, Sunnyvale, Apple — you’d be right, kind of. Lane last month sold two buildings at 500 and 501 Macara Ave. to a Chinese-backed investment company for an astonishing price north of $600 per square foot. That project, however, was owned by a different joint venture — Lane Partners and Pimco.

In the latest deal, Lane bought the project, originally seven buildings, from Maxim while at the same time arranging the company’s relocation to a 434,000-square-foot North San Jose campus.

“We repositioned the entire project — landscaping, courtyards, hardscape, new facades and entries,” Smithers said.

Apple ended up leasing five buildings as the Mac maker experienced explosive growth. Lane also leased one building to Illumio at 160 San Gabriel Drive. And Lane sold one building at 185 N. Wolfe Road to CPP, the company known for the Myers Briggs test. (Read more about that deal here.)

Lane may have sold out of this project, but the company has plenty of other irons in the fire.

On the new development front, Lane is seeking approval for a 25,000-square-foot project at 1020 Alma Street in Menlo Park. Lane is also working on a new project in Sunnyvale at 520 Almanor Ave. It has also re-submitted plans for an office building in Redwood City. A previous proposal called for a 180,000 square foot building at 2075 Broadway, but hit turbulence during the city approval process. Lane has now proposed a smaller project, at around 90,000 square feet, which may have an easier path to getting approved.

Lane is still leasing up its Orchard Commons project, a renovation play in north San Jose that is seeing more activity lately. Its highest profile current asset is probably the former Sears building in Oakland. Lane is doing a major renovation of the historic structure and just landed a gourmet market on the ground floor.