SAN JOSE, CA-Divco West Properties has recapitalized the Park Center Plaza in a transaction that values the property at about $105 million. The 700,000-sf office and retail complex is the largest multi-tenant office campus Downtown.

The Divco-managed Page Mill Properties Fund and the Rreef-managed CalSmart (CalPERS) Fund have taken out a majority interest previously held by Harvard Private Capital. Divco, which retained its minority position, and Page Mill now combine for a 50% interest in the property while the CalPERS fund owns the other 50%, a source familiar with the transaction tells

The center now holds 15 buildings including the class A Heritage Bank office building on South Market Street and several low-rise concrete structures in the center of the plaza. Major tenants include BankAmerica, Heritage Bank, the County of Santa Clara Court House, SNAP, and Scotts Seafood Restaurants. Occupancy was not immediately available.

As part of the recapitalization, the new partners will undertake an estimated $10-million dollar renovation of the property. Redevelopment plans call for the demolition of four of the low-rise concrete structures in order to open up a central plaza, and the renovation of the remaining structures, including the 15-story Heritage Bank office building on South Market Street. Other renovated buildings will ultimately be used to provide additional dining options.

This is the second major joint venture between affiliates of Divco West and Rreef. In October 2003, a Rreef client and the Page Mill Fund paid $80 million for the largely vacant Market Center, a two-building 770,000-sf class A office complex located on Market Street in the center of San Francisco’s financial district with views of the city and the bay. One of the buildings is entitled for an upper-floor residential conversion. The property came to market in spring 2003 in a lender-driven disposition that followed a loan default by building owner Tishman Speyer Properties.

The Page Mill fund closed last fall with $290 million in equity from major institutional and private investors, including $10 million from Divco, and has made five investments. Targeting 20% returns, Divco says Page Mill makes value-add plays in Northern California and similar, technology dominant markets such as Seattle, Boston and the Dulles Corridor in Northern Virginia. “The key to the success of this fund is to remain patient and buy the right properties at the right basis,” Divco co-founder Stuart Shiff told earlier this year.

Also in the Page Mill portfolio is a 50% interest in the 12-story, 282,000-sf Mission Towers Two building in Santa Clara, CA, for which the fund paid $16.4 million. The seller was publicly traded chip maker PMC-Sierra Inc., which had purchased the building from a joint venture of Tishman Speyer, Travelers Real Estate Venture and Whitehall Street Real Estate Limited Partnership IX in order to void a $215-million lease obligation to the sellers. Like Market Center, the building was largely vacant.

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