Kevin Pursglove, the spokesman for eBay, tells GlobeSt.com the company is indeed talking with Novell about its five-building 511,000-sf campus on North First Street near Mineta San Jose International Airport. Then again, says Pursglove, they are talking to a couple of others as well, and, in the long run, could end up staying at its current headquarters on Hamilton Avenue.

eBay is three years into a five-year synthetic lease for the Hamilton Avenue space. The lease totals 460,000 sf. eBay occupies 314,000 sf and has subleased a portion of the remainder. According to terms of the agreement, it must either purchase the facility prior to March 1, 2004 for $126.4 million--the lessor's cost to develop the property--or sell it to a third party, in which case eBay has guaranteed the lessor no less than $111.2 million, which equates to 88% of the development cost. The rumored purchase price for Novell's complex is roughly $100 million.

One reason the company may want to acquire or sell the facility in the next few months is that after June, as a result of a new interpretation by the Federal Accounting Standards Board, companies must substantially change how they account for variable interest entities, which includes synthetic leases. eBay estimates that the impact to its income statement for not selling or acquiring the property prior to July will consist of a charge against earnings, net of taxes, of $5.6 million.

Pursglove says eBay wants a location that will serve the company's needs for the next 10 to 15 years, which means the location likely would need to hold double the space eBay currently leases in San Jose. Given that, the Novell facility would not be able to accommodate the company unless the City of San Jose, which is acquiring from Novell about 16 undeveloped acres surrounding the campus, decided to sell the land back to eBay rather than using it for rental car parking following the expansion of the airport, as planned.

According to Novell's year-end financial report, 175,000 sf of its North First Street property is vacant, 222,000 sf of it is subleased to other tenants and the rest is occupied by Novell administrative staff. 3Com Corp., Exodus Communications and Ariba Inc. also are said to have corporate campuses available in the valley that could accommodate eBay.

Jeff Black, the Grubb & Ellis broker who represents eBay, declined comment for this article.

Instant Insights /

eBay Denies Search for Space has Ended at Novell's Doorstep

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