By Jon Peterson
San Francisco-based Rubicon Point Partners has paid $15.86 million, or $550 a square foot, to acquire 274 Castro St. in downtown Mountain View in a joint-venture partnership that includes Los Angeles- based Canyon Capital Realty Advisors, according to research from Colliers International.
San Francisco-based M&H Realty Partners sold the 29,000-square-foot office building, which was first developed in 1949.
The building is around the corner from 303 Bryant St., also in downtown Mountain View. Silicon Valley’s Menlo Equities acquired that 55,906-square-foot office building for $40 million, or $715 a square foot, during the second quarter, according to Jones Lang LaSalle. It is fully leased to Speck Product Design, which moved from Palo Alto to Mountain View and expanded.
Both buildings are within two blocks of the Mountain View Caltrain station, which is served by the fleet’s Baby Bullet express trains. They are also about a mile from Highway 101 and near a flush of new rental housing.
The primary tenant at 274 Castro is Quixey, a search engine for apps that lets users search by the task they wish to complete rather than an app’s name. Quixey occupies 17,500 square feet. Its lease expires in 2018. The company’s current rental rate is 20 percent below market, according to Colliers.
Carla Lindorff, a senior vice president for Colliers in San Jose, said Mountain View rents have held firm over the past 12 months. Vacancy, including downtown and the Shoreline district where Google Inc. dominates, has dropped to 6.22 percent in the second quarter, from 9.65 percent in the same quarter a year ago.
Lindorff and Colliers’ Brett Taylor, a tenant representative, provided financial details of the Castro Street transaction with the seller’s name; the buyers announced the sale June 26 with no purchase price or seller information.
The new owners plan to update the building’s second floor into an open, creative and interactive office space for a new tenant in 2014. The building, originally a single- story retail building, was renovated in 2012 to convert the basement and ground floor space to office space.
The investment is the first for Canyon Capital’s new investment entity, The Canyon Catalyst Fund, which is backed with $200 million from the California Public Employees’ Retirement System, CalPERS. The fund is conceived to cultivate emerging managers to become the next generation of real estate experts.
Canyon is in the process of adding three more real estate managers to the Catalyst Fund, including one more in Northern California and two in Southern California.
“Our allocation to Rubicon will allow the company to invest $60 million to $100 million of equity and debt capital into the San Francisco Bay Area,” said Maria Stamolis, a Canyon managing director. “This will be a long-term relationship, one that we hope we can grow in the future.”
She declined to disclose the exact amount of equity that was funded to Rubicon. Rubicon is expected to buy office, research and development buildings and data centers in Northern California.
CalPERS hired Canyon Capital for the emerging managers program last fall. Canyon Capital has investment discretion on which managers are chosen. The firms selected must get each property they buy approved by Canyon.
To qualify for the Catalyst Fund, each manager must have less than $1 billion of assets under management and have no more than three prior commingled funds or separate-account investment vehicles.