Brocade campus, parking garage sells for $225.5 million following merger, layoffs

Following a merger and planned layoffs, Brocade Communications has sold its three-building campus and a nearby parking garage to a realty developer.

The complex, whose primary features are three office buildings totaling more than 541,000 square feet, sold for $225.5 million.

The sale was completed Nov. 30, according to county records. Brocade sold the properties in four transactions to separate affiliates controlled by Menlo Park-based Lane Partners. The respective buyers were 110 Holger Owner, 120 Holger Owner, 130 Holger Owner and 95 Headquarters Owner.

But the real financial muscle behind the deal appears to be a lender operating under the name Parlex 6 Finco.

The Parlex 6 Finco entity, which corporate records shows is a foreign limited liability company with offices in Manhattan, provided the Lane Partners group with $197.4 million in financing for the deal.

“This is a big purchase, and it makes sense that there is foreign money or money from outside the Bay Area coming in here,” said Chad Leiker, a first vice president with Kidder Mathews, a commercial realty brokerage. “There is worldwide pent-up demand for Silicon Valley properties.”

In the Brocade deal, the Lane Partners affiliates paid $78 million for the 130 Holger Way offices, $75 million for the 120 Holger Way building, $42.5 million for the 110 Holger Way offices and $30 million for the parking garage, the county records show.

The new owners and financiers of the campus and parking garage must confront the forbidding prospect that Singapore-based Broadcom, Brocade’s new owner after a $5.5 billion deal that was completed in November, could vacate the buildings in a quest to slash expenses following the acquisition.

The Broadcom cost-cutting effort has already begun. By sometime in January, 308 Brocade employees will be permanently laid off, according to state government documents.

“This will only impact certain employees selected for layoff,” according to a Broadcom filing with the state Employment Development Department that outlined the Brocade job cuts. “This planned action is expected to be permanent. Impacted employees are eligible to receive severance benefits.”

Plus, the pace of job growth in the Bay Area — and Santa Clara County — has slowed drastically this year.

Over the 12 months that ended in October, the Bay Area job market expanded at an annual pace of 1.2 percent, compared with 2.9 percent in 2016 and 3.7 percent in 2015. During the same one-year period, the Santa Clara County job market grew 1.5 percent, sharply slower than 2.9 percent in 2016 and 3.5 percent in 2015, state labor statistics show.

The slower hiring trends could be a warning flag for commercial property investors who have been paying top dollar for office buildings in recent years, including during 2017.

“The market is changing, and buyers today may find that it’s a different story here in a little while for office vacancies and property values,” Leiker said.

Despite a more-sluggish job market in the Bay Area, an array of plans are being laid to develop new offices and upgrade existing ones. What’s more, domestic and foreign buyers, including investors from Asia, have been purchasing numerous office complexes. Buyers should be wary, warned Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.

“Silicon Valley has a very strong economy, but job growth is slowing dramatically and there will be some disappointed property investors,” Levy said. “It’s musical chairs and somebody will be left with the empty building.”

Source: The Mercury News December 4, 2017 6:45am

Author: George Avalos

Image Credit: George Avalos/ Bay Area News Group

Read More: http://www.mercurynews.com/2017/12/04/brocade-campus-parking-garage-sells-for-225-5-million-following-merger-layoffs/