Thank you for sharing!

Your article was successfully shared with the contacts you provided.

SANTA CLARA, CA-Yahoo is making an early exit from a pair of eight-story class-A office buildings here as part of an ongoing cost reduction initiative that included 1,600 layoffs in the final three months of the year as well as $108 million in severance, facility and other restructuring costs. The company’s leasehold on the 385,000-square-foot development at 2811-2821 Mission College Blvd. expires in August 2010 but it plans to be out by May 2009, according to Mike Field, director of real estate for the building owner, the Sobrato Organization, who spoke with GlobeSt.com Thursday morning.

The 8.6-million-square-foot Santa Clara office market ended the year with a 14% vacancy rate and an average asking rate of $2.95 per square foot per month. Yahoo’s lease overhang–about 13 months once it vacates—is being offered for sublease at $1 per square foot per month. The company is believed to be paying somewhere in the vicinity of $1.60 per square foot.

“They signed the lease in 2003 at a pretty favorable rent,” Field tells GlobeSt.com. “They are passing some of that onto a new subtenant.”

Owned by the Sobrato Organization, the buildings were built in 2000 at 2811-2821 Mission College Blvd. Given the short remaining sublease term, Field says any prospective tenant likely would be negotiating directly with Sobrato as well.

Yahoo’s headquarters campus here totals 1.8 million square feet and is comprised of both Yahoo-owned buildings and approximately 800,000 square feet that it leases from Sobrato, including the two buildings it is vacating. A Yahoo spokesperson tells GlobeSt.com it will be consolidating employees from the Mission College buildings onto its Great America and Sunnyvale campuses.

“Yahoo is not only one of our largest tenants they are a very good tenant to work with,” Field says. “Yahoo notified us well in advance. This is just part of the process companies go through. We look forward to finding another tenant for the space.”

Yahoo on Wednesday reported a fourth quarter loss of $303 million or $0.22 per share, compared to a $206-million ($0.15 per share) profit in the same 2007 period. Revenue for the quarter was $1.8 billion, down 1%. Yahoo’s new CEO Carol Bartz, formerly with Autodesk Inc., said the company’s cost reduction initiative has included the aforementioned 10.5% headcount reduction, restructuring of certain business partnerships, outsourcing of various business support activities, reduction of non-headcount related spending, and facilities consolidation.

With regard to severance, facility and other restructuring costs, the company said it incurred costs of $108 million including $80 million for employee severance pay expenses and related cash expenditures and $24 million for exited facilities. Two thirds of the facilities costs were attributed to non-cancelable lease costs while the remainder was related to the write-off of tenant improvements, furniture and fixtures.

The company estimates those same costs in 2009 will amount to between $40 million and $55 million. The total includes between $35 million and $45 million for non-cancelable lease costs, relocation costs and the write-off of tenant improvements, furniture and fixed assets as the Company continues to exit facilities, and between $5 and $10 million related to workforce reductions.

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

Once you are an ALM digital member, you’ll receive:

  • 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

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.