If an “Extreme Makeover: Office Edition” reality show ever gets green-lighted, Bixby Land Co. could make a case to be its host.
The Irvine-based real estate investor and developer has found a niche of late as something of an office fixer-upper, targeting older buildings in Silicon Valley and Southern California for redevelopment projects, with the goal of turning them into creative-office spaces that can appeal to large and small tenants.
Bixby has already earmarked some $70 million over the past two years for a series of amenity-rich rehab projects up and down the West Coast, including buildings it bought over the past year in Torrance, Carlsbad and El Segundo (see story, page 32).
That’s nearly the same amount of money Bixby and its financial partners initially paid for the properties.
The company’s first two office rehab projects in Silicon Valley, already a hit with tenants to the tune of $56 million worth of leases, are also beginning to grab the attention of investors.
A Bixby-headed venture sold a recently leased, 127,000-square-foot Santa Clara property to AEW Capital Management LP of Boston last week.
Terms of the deal weren’t disclosed, but commercial real estate brokers in the Silicon Valley area said the building traded hands in the $42 million range, or for about $330 per square foot.
Bixby Chief Executive Bill Halford called the transaction “hugely profitable” for the company, which had owned the two-building Coronado Drive property since 2007; it’s a few blocks from the 101 Freeway.
Bixby bought out a prior partner’s stake in the building a few years ago, with the plan to renovate the vacant, older property into a more appealing destination for technology tenants.
It brought on New York-based JP Morgan as a new partner and put nearly $12 million of work into the property, including adding a two-story glass pavilion to connect the two buildings, the addition of a courtyard lounge, and other tenant-friendly amenities.
It then leased the building to Infloblox Inc., a locally based network infrastructure company.
Infoblox’s eight-year lease, which begins this year, was valued at more than $25 million.
Last week’s sale represented “an opportune time to realize our investment objective” for the property, Halford said.
Another recently rehabbed three-building office campus Bixby owns in San Jose—known as River Oaks—could be the next notable sales opportunity for the company if it follows a similar strategy as the Coronado Drive property.
Last month, Bixby announced a deal with another locally based tech company, data storage firm Nimble Storage, which will occupy the entire 165,000-square-foot River Oaks campus.
The eight-year lease is reported to be one of the larger office deals the Silicon Valley office market has seen this year and was said to be valued at more than $31 million.
Bixby bought the 30-year-old property in mid-2011 for a reported $19.5 million and spent nearly $14 million renovating it.
The company, which recently unveiled plans for a $24 million rehab project at a roughly 250,000-square-foot San Jose property, hasn’t announced whether it plans to sell River Oaks anytime soon
Eyeing Local Deals
Meanwhile, Bixby is increasingly looking at Southern California for similar redevelopment opportunities.
The local office market “is a year or two behind Silicon Valley in the recovery,” Halford said.
There’s also “more opportunity in Southern California,” he said. “It’s harder to find (older, empty buildings) in Silicon Valley. There’s more investors that are looking for those types of opportunities.”
The company announced plans last month to spend $10 million on a vacant, five-story office it recently bought in El Segundo, with plans to transform it into a building resembling a resort or boutique hotel.
The 112,695-square-foot property, previously occupied by defense contractor Raytheon
Co., is on El Segundo Boulevard and about two miles from LAX airport. The building, once renovated, is expected to appeal to “progressive-minded firms that want an alternative workplace,” the company said.
Its lobby will feature lounge seating and custom music, and there will be outdoor gathering areas for tenants at the property, which will be dog-friendly and provide beach cruiser bicycles for tenants’ use, according to the company.
When it comes to the rising interest of creative-office space, “a lot of (developers’ plans) are overblown,” said Halford, whose company’s version of that type of office design emphasizes unique outdoor space for meetings and socializing.