Investors buy Palo Alto research buildings next to Google properties
Alexandria Real Estate pays $291M for former SSL site
PALO ALTO » A Southern California developer and realty investor has dramatically widened its shopping spree for Palo Alto properties in choice sites with the purchase of a huge lot containing multiple buildings next to parcels Google owns.
Alexandria Real Estate, which owns and is developing multiple office buildings along San Francisco’s eastern shoreline near the gleaming Chase Center, has lately turned its attention to sites in Palo Alto, one of Silicon Valley’s hubs for tech and life sciences.
Pasadena-based Alexandria, acting through affiliate ARE San Francisco No. 80, has gobbled up research and office buildings in Palo Alto that were sold by satellite maker SSL, according to Santa Clara County property records that were filed on Dec. 10.
The Alexandria affiliate paid $291 million — in cash — for the buildings that had been owned by SSL, county documents show.
The buildings are at least a half-century old and have addresses of 3825 and 3875 Fabian Way. They have been used for decades by SSL and its predecessor Space Systems Loral, a famed defense contractor that manufactures satellites. SSL is now a unit of Maxar Technologies.
Property databases show that one building involved in the deal was constructed in 1956 and another was built in 1967, relics of the heyday of the defense industry that blossomed in Silicon Valley during the Cold War.
Yet for Alexandria, the real value of the properties might be the nearly 24 acres of land beneath the buildings. The properties could potentially be redeveloped and replaced with modern office buildings.
Alexandria’s expertise includes the development of office and laboratory space for life sciences and technology companies. That’s the sort of space Alexandria has developed along the San Francisco waterfront near Chase Center and the Oracle baseball park, replacing aging structures with sleek new buildings.
The push into Palo Alto real estate by Alexandria includes a string of purchases in 2018 and 2019.
In January 2018, Alexandria Real Estate paid $136 million for Embarcadero Place, a four-building office complex on Geng Road near Embarcadero Road in Palo Alto.
About a year after that, in January 2019, the developer paid $100 million for an office building at 3170 Porter Drive in Palo Alto. Then in August of this year, Alexandria paid $97 million for an adjacent office building at 3160 Porter Drive. The seller in both of these deals was a high-profile organization: Stanford University. The university continues to own the land beneath the two Porter Drive buildings.
Alexandria Real Estate’s most recent Palo Alto purchase of the SSL buildings on Fabian Way leaves the developer with Google as perhaps its most high-profile neighbor.
Google has launched a jaw-dropping buying binge for land, office buildings, industrial sites, and commercial properties throughout Silicon Valley, primarily in San Jose, Sunnyvale, Palo Alto, Redwood City, and Mountain View. The search giant has spent billions of dollars in recent years obtaining the properties.
In December 2018, Google paid $70 million for a long and narrow building at 3850 Fabian Way. And a property database shows that Google also bought a triangle-shaped lot at the corner of Fabian Way and East Meadow Drive in 2013.
The interest by Google, Alexandria Real Estate, and other investors in the South Bay city suggests that Palo Alto remains a hotbed of realty investment and commercial development activity despite pricey values.