A hot year for San Jose properties was a significant windfall for the owner of two large Almaden Boulevard office buildings, providing a rare insight into the area's current fundamentals.
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A real estate investment trust managed by KBS saw appraised values plus capital expenditures for its two downtown San Jose properties soar by a combined $32.2M, or 8.3%, according to a letter to shareholders released on Tuesday.
KBS REIT III acquired 10 Almaden, a 17-story Class-A office tower, from Equity Office in 2014 for $116.7M. The following year, it snatched up The Almaden, a three-building office park across the street, for $150M from Embarcadero Capital Partners.
KBS chalks up the pair's performance to a jump in rents and sale prices, as well as San Jose's dwindling office vacancy rate. Annual market net rental rates grew 13% from $49.70 per SF to $56.30 per SF in the year between appraisals, according to the company.
Over that same time, downtown San Jose saw some of its priciest transactions, led by San Francisco-based Jay Paul Co.'s June purchase of 50 West Fernando St. for a record price of $667 per SF. Jay Paul's redevelopment plans to turn the 600K SF CityView Plaza into a 3.4M SF office campus have temporarily decreased available space, boosting fundamentals for existing properties, KBS points out.
Built in 1981, The Almaden, which underwent a renovation in 2006, includes tenants like Zoom Video Communications and Samsara and features amenities like a fitness center and a bar area. Across the street, a mix of tenants, including Grant Thornton, occupy 10 Almaden Blvd.
KBS also owns the newly renovated District|237 on Holger Way, a five-building, 415K SF office park in North San Jose.
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