Applied Materials-occupied Santa Clara building lands big-time buyer

SANTA CLARA — A big Santa Clara office building that’s completely occupied by tech titan Applied Materials has been bought by a top-level real estate firm in a deal that points to some Silicon Valley office market strength.

Preylock, a real estate investment firm, paid $182.5 million for an office building at 3333 Scott Boulevard in Santa Clara, according to documents filed on June 15 with the Santa Clara County Recorder’s Office.

Santa Clara-based Applied Materials, one of the world’s largest producers of equipment and software to make semiconductors, subleases the office building, which totals about 246,000 square feet.

CBRE Global Investors and The California Teacher’s Retirement System (CalSTRS), acting through an alliance, sold the office building to the Preylock-led group.

To finance the purchase, Greylock obtained $120.8 million from lender Pacificcal Debt II, the county documents show.

Worries have begun to widen among investors about the strength — or frailty — of office markets nationwide, including in the Bay Area, as a result of the economic ailments that the coronavirus has unleashed.

The deal, however, suggests that office building values are holding up for properties occupied by or leased to tech alphas such as Applied Materials, despite the coronavirus-linked uncertainties.

During the 12 months that ended in April, Applied Materials earned a profit of $6.45 billion on revenue of $26.25 billion, according to the Yahoo Finance site.

The six-story office building was last bought in 2017 for $162.5 million public records show. Plus, the estimated value of the office building was $171.7 million as of July 2022, documents on file with the Santa Clara County Assessor’s Office show.

This means that the building was purchased at a price that was 6.3% above its assessed value from mid-2022 and 12.3% above the price paid six years ago.

Any signs of strength in the Santa Clara city office market are particularly welcome, especially considering the brutally high level of office spaces that are available for rent.

During the January-through-March first quarter, an estimated 16.5% of the office buildings in Silicon Valley were available for lease or sublease, according to a report from Colliers, a commercial real estate firm.

Santa Clara, in sharp contrast, had 29.2% of its office space available to be rented, Colliers reported. Santa Clara in the first quarter had to endure Silicon Valley’s highest level of empty or unwanted office space