Palo Alto office shopping spree tops $850 million

PALO ALTO — A big Southern California real estate and investment firm has gobbled up its latest in a string of Palo Alto office property purchases, a deal that extends a buying spree in the Silicon Valley tech hub that now tops $850 million.

Alexandria Real Estate, acting through an affiliate, has bought two Palo Alto office buildings on Hillview Avenue near Arastradero Road, acquiring a site that’s in the famed Stanford Research Park.

The deal suggests investors still seek to collect commercial properties in choice and prestigious locations despite the economic uncertainties that the coronavirus has triggered.

The just-purchased buildings have a combined 77,000 square feet, according to Santa Clara County property documents and commercial real estate listing services. SAP, a tech giant, is the tenant in the two buildings.

Pasadena-based Alexandria Real Estate paid $40.5 million for the buildings, county documents filed Oct. 8 show. Alexandria bought only the buildings, county documents indicate. As is the custom for Stanford Research Park, Stanford University retained ownership of the land beneath the buildings.

The 3450 Hillview office building totals 42,000 square feet, while the 3460 Hillview building is 35,000 square feet. The parcel on which the buildings stand totals 7.4 acres.

Alexandria’s recent acquisition is far from the only Palo Alto purchase by the veteran developer in recent years. All told, Alexandria has spent an eyebrow-raising $855 million to buy office buildings in Palo Alto in a shopping spree that began less than three years ago.

The real estate firm’s expertise includes development of office and laboratory space for life sciences and technology companies. This is the sort of space that Alexandria has developed along the San Francisco waterfront near Chase Center and the Oracle baseball park, replacing aging structures with sleek new buildings.

The first of the Alexandria Palo Alto purchases occurred in January 2018, when the company paid $136 million for the Embarcadero Place office complex on Geng Road. About a year later, Alexandria paid $100.3 million for an office building at 3170 Porter Drive that’s leased to Jazz Pharmaceuticals. Then in August 2019, Alexandria paid $97 million for an office building leased to Stanford Health next door at 3160 Porter.

In December 2019, Alexandria paid $291 million for a vast property that contains several aging buildings whose occupant and owner for decades has been SSL and its predecessor, Space Systems Loral, a famed defense contractor. These buildings are at 3825 and 3875 Fabian Way. Google owns properties near the SSL site that Alexandria bought in late 2019.

In February 2020, Alexandria paid $75.9 million for Palo Alto office buildings with addresses of 3412 and 3330 Hillview Ave. SAP and Kirkland & Lewis law firm are listed as tenants there.

In August 2020, Alexandria affiliate ARE San Francisco No. 85 paid $115.2 million for another Porter Drive office building. Jazz Pharmaceuticals is the tenant. ARE San Francisco No. 86, which business records show is controlled by Alexandria Real Estate, was also the buyer in the company’s most recent purchase.

While the Alexandria Real Estate buying binge is remarkable, experts have pointed out that Palo Alto is deemed one of the Bay Area’s most attractive commercial property hubs.

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