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SUNNYVALE, CA-A 20-year-old, single-story R&D campus here is methodically being torn down and replaced with four- and five-story class A office buildings. The first phase of Java Metro Center, a five-story, 150,000-sf building and a four-level parking garage, is underway. Completion is slated for this time next year.

The developers, a partnership of SCM Properties, who contributed the land, and Exterra Realty Partners, who had the idea, is capitalizing on the city’s plan for increased density around the VTA light rail line and, hopefully, increased demand for mid-rise class A office in a region dominated by low-rise industrial-style buildings built out for office and research uses.

Goldman Sachs is putting up all of the $60 million it will cost to complete the project. “We tore down one of the three existing buildings, leaving two, one leased and one not,” Exterra principal Mike Parker, formerly a longtime Koll Development partner, tells GlobeSt.com. “What we were able to do was contribute the property free-and-clear and borrow 100% of the construction cost as well as the cost to carry the empty building through lease-up.”

With some six million sf of requirements in play in the heart of the Silicon Valley, Parker says the listing agents for the development, CPS Corfac International principals Steve Pace and Dan Hollingsworth have responded to RFPs that would fill the first two buildings. There’s plenty of competition out there, including the 1.8-million-sf Moffett Towers project, but Parker is betting the lower-rise, relatively less dense nature of Java Metro Center will attract its own set of tenants.

The development site is just north of Highway 237 in Moffett Park and near Highway 101. The properties are a few blocks from the corporate campuses of Yahoo Inc., Juniper Networks and Network Appliance.

SCM Properties originally acquired the property in the early 1980s and built three, single-story R&D buildings located at 111 Java Dr., 169 Java Dr. and 140 Caspian Court. The original tenant was Lockheed Martin Corp. and later, the properties served as the headquarters for SanDisk Corp. until their relocation to Milpitas in 2006.

The 111 Java Dr. building has been torn down to make way for the Java Metro’s signature, which will be situated at the corner of Java Drive and Borregas Avenue, immediately across from the Borregas Light Rail Station along Java Drive. The building at 169 Java Dr. is fully leased for the next five years and the 140 Caspian Court building, which is approximately 104,000 sf, is available for lease. Parker says the timeline for their respective demolition and replacement with the four-story buildings will be dependent on leasing prospects. In the long run, there is potentially room for a second parking garage and a fourth office building, Parker says.

“With severely constrained supply for class A offices in Silicon Valley and few large contiguous blocks of space available for lease in Sunnyvale, tenants in the marketplace are expressing strong interest for a portion of the campus or potentially all of it,” says Pace. He added that asking rental rates for Java Metro Center have not been established but current rates in the area are “about $3 per-sf and escalating monthly as supply dwindles in step with the region’s expansion of high technology companies.”

As part of the agreement with the city for the increased density, the project is being built to “green” specifications developed by the US Green Building Council for its LEED certification program. Parker says the building will be built to LEED Silver specifications. Most of the materials from the demolished buildings will be recycled, with existing concrete and asphalt paving to be used as on-site, infill materials. Other materials such as metal studs are slated for recycling and copper wire is being pulled from the existing structures to be re-used.

Java Metro Center was designed by Chang Architecture of Burlingame. The Wentz Group, based in Redwood City, is the general contractor. Project financing was arranged by the Orange County and San Francisco offices of Holliday Fenoglio Fowler LP, based in Irvine.

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