January 14, 2015

Silicon Newbie Ramps Up Acquisition Plan

LA-based Decron Properties just made its first buy in Silicon Valley and is targeting an additional $260M of acquisitions in the Bay Area this year.

VP of acquisitions Daniel Nagel tells us Silicon Valley is a very challenging market to enter, but the firm just scooped up a 187-unit garden-style apartment community in Mountain View for $86M. Decron had been been focused on entering the submarket for more than 18 months. "Aside from learning the dynamics of each pocket of the Valley, we needed to earn the trust of the brokerage community," he says. Here's CEO David Nagel speaking to the sold-out crowd at the fifth annual YULA High School Golf Tournament in LA (Decron is the lead sponsor each year). 

To nab its first buy, Daniel tells us he spent a lot of time on planes traveling to properties and ending up somewhere between second and last place on more than a dozen deals before establishing Decron Properties as a serious buyer. It was a slow process with many disappointments, he adds. The real estate investment and development arm of the Nagel Family Trust has owned and invested across the state for 55 years--but not in NorCal until now. The 5,000 units it owns and manages are mostly in SoCal and play host to lots of pool parties, like this West Hollywood complex.

He's got another $63M of assets teed up to close by the end of the month. Highland Gardens, at 222 and 234 Escuela, is a mix of studio, one-, two- and three-bedroom apartments. The seller, a JV between Maximus Real Estate Partners and Rockpoint Group, dumped millions of dollars into renovating the 1960s-era complex in 2013. Decron plans to further upgrade the units to match new apartment construction in the submarket. 

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Jazz Pharma Inks Whopping $96M Lease

Jazz Pharmaceuticals just nabbed a chunk of coveted Palo Alto space in the pristine Stanford Research Park by inking a deal with the university's real estate group to construct a building at 3170 Porter, according to a recent SEC filing. The R&D structure will contain 95k to 105k SF, with a base rent of $5.50/SF each month and is near its current space at 3180 (pictured). The pharma giant moved its HQ from Palo Alto to Dublin, Ireland, three years ago (they have lush greenery here, too). Jazz expects to pay about $17M for leasehold improvements and net of TI allowances, adds the filing. Palo Alto Class-A office vacancy was rock bottom in Q4, at 2.5%.

The market is on the edge of its seat to find out just how high a rare four-building cluster just steps away will sell for (the deal could close this month). Valuations are through the roof, sources told us last month. The complex on Hillview totals 292k SF. The buildings are owned by business software maker Tibco (and serves as its campus). Facing declining revenues, Tibco agreed to be bought by private equity firm Vista Equity Partners for $4.3B in September, taking it from public to private. Selling off its real estate is part of that buyout. The capital chasing the deal is very diverse and very global, our sources say. Expect to see eye-popping numbers. Cushman, which is marketing the site, didn't respond to a request for comment.

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RealCrowd's Record-Breaking Deal

Pyatt Broadmark Real Estate Loan Fund (focused on the Pacific Northwest) raised more than $3M in less than 120 days on RealCrowd, making it the largest debt fund capital raise by a commercial real estate crowdfunding platform to date, RealCrowd says. The fund is operated by Seattle-based Broadmark Capital, which has more than $90M in assets under management. The fund focuses on Washington, Oregon and Idaho real estate. Last year, Flaster/Greenberg attorney Mark Roderick told us crowdfunding could shake things up just as Uber has done for taxis. He says we are five years away from $50M deals getting done. (Now we're at $2M.) RealCrowd CEO Adam Hooper (pictured), who spoke at Bisnow's recent Creative Office & Tech event at Hotel Nikko, says his Palo Alto-based company has tripled to 17 employees in a year. Broadmark Capital now has a second fund open on RealCrowd that's focused on high-yield debt investments in Denver and the Mountain West. 

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First to tell us about a recently closed deal gets a free State of the Market ticket! tierney.plumb@bisnow.com