Peatross and his local team, led by John Moe and Todd Hedrick,oversee the Bay Area portfolios of CarrAmerica, Equity Office andTrizec, which at approximately 20 million sf is the largestportfolio in the region. All three of them declined comment forthis article, as did the brokers directly involved, but other localindustry sources tell GlobeSt.com the market-leading portfoliogives them a clear view of the local landscape and, as a result, anadvantage over many existing and potential competitors.

|

"They've definitely taken advantage of the portfolio they have,"one local source tells GlobeSt.com. "It gives them good foresighton what's happening in the market."

|

The biggest of its recent deals was Cisco Systems' 12-year leasefor the entire 472,000-sf former Veritas campus at the south end ofthe MacCarthy Ranch development in Milpitas, west of Highway 880.The commitment includes an option for new space to be built on the34.5 acres of excess land that came with CarrAmerica's acquisitionof the vacant two- and three-story, three-building campus in August2006. Scott Mathisen and Erich Sengelmann with JLL's Silicon Valleyoffice represented Cisco.

|

CarrAmerica is said to have acquired the campus and the excessland--which can hold an additional one million sf ofdevelopment--for about $140 per sf. Two buildings are "cold shells"that have never been occupied while the third is built out but notto Cisco specifications. Cisco is said to have leased the space for$2 per sf. It plans to occupy the finished building in Januaryafter modifications and the other two a couple of months later,according to local sources.

|

Last month, CarrAmerica acquired a 142,000-sf building at 350 E.Plumeria for $130 per sf and instantly added value by leasing thewhole thing to Netgear. The wireless router maker signed a 10-yearlease, $30-million deal that commences in April 2008. The rentalrate starts (in the 10th month) at $1.50 per sf per month and rampsup to $1.95 over the course of the lease, according to SECfilings.

|

Around the same time, CarrAmerica paid $220 per sf for a100,000-sf building that is part of a 500,000-sf campus on HolgerWay in San Jose, the rest of which it acquired over the past fewyears for approximately $130 per sf. Shortly thereafter, it renewedand expanded the main tenant, Ericsson, by 176,000 sf. Thetelecommunications giant now occupies 320,000 sf, some of which itinherited from Redback Networks, which it acquired last year for$2.1 billion. The average lease rate on the deal is said to benorth of $2 per sf.

|

"It's easier for companies if their space requirements can betaken care of by existing facilities or expansions that occur neartheir existing locations," says another local source. "No one likesto move, and Peatross has been very adept at taking advantage ofthat, especially since construction costs are higher and availablecampus properties are becoming much harder to find."

|

John Yandle, an SVP and manager with the brokerage firm Cornish& Carey, which was involved in some of the deals, saysCarrAmerica has separated itself from the pack by being creative inits deal making. "For example, on the [Ericsson] deal, in order tocreate the space for that company's expansion, CarrAmerica had toacquire another building before Ericsson had signed a leaseagreement," he says. "They were willing to do it because they knowthe market."

|

Netgear signed its deal on faith that CarrAmerica could executeits plan for turning a second-generation building that needed a lotof rehab work into a nice place to work. "The building hasn't beenfixed up yet," Yandle says. "It was CarrAmerica showing themexamples of things that it has done elsewhere that gave them theconfidence to sign the lease."

|

Yandle says CarrAmerica's ability to create real value will helpit in the long run. "There's been a lot of buying and selling ofproperties in recent years and all that works and everybody for themost part has come out looking good thanks to a rising market, butthe time has come where we've now reached the peak of the risingmarket and it's time for true developers to come out and dosomething to buildings to create a better product than they boughtand to buy it smartly enough to have the money to do it," Yandlesays. "That's the real challenge in the Valley right now."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.