401 Ellis St. in Mountain View is one of the properties Google bought last week.
In its largest property purchase of the year, Google Inc. has just paid $235.5 million to acquire a six-building portfolio in Mountain View — including two buildings that are leased to another blue-chip corporate tenant: Symantec.
The transaction, which totaled just over 400,000 square feet of office space, is the latest in a string of major leases and acquisitions for Google. Many of those deals have closed in the third quarter as the search giant continues a breathtaking expansion and hiring binge.
Google made its latest purchase from Equity Office, according to property records filed Friday. The acquired properties include:
- Mountain View Technology Center a 131,500-square-foot, two-building project at 313 and 323 Fairchild Drive, for which Google paid $82.2 million, or $625 per square foot.
- Gateway Center, a 236,400-square-foot project at 401 Ellis St. and 500 E. Middlefield Drive. Google paid $138.8 million, or $587 per square foot.
- 485 and 495 Clyde Ave., a pair of R&D buildings totaling 64,800 square feet. Google paid $15 million, or $230 per square foot.
Google is already in the Fairchild Research Center, which it has leased since June 2011. But it does not occupy the other spaces. Computer security software pioneer Symantec occupies Gateway Center, and OpenTV, a television-tech company, is the main tenant in the Clyde Avenue project.
It’s unclear what Google’s plans are for the Symantec-occupied spaces. Symantec leased 401 Ellis St. in 2010, and followed up with 500 E. Middlefield Drive in fall 2011. Google, Equity Office and Symantec were not immediately available for comment.
Symantec owns about 725,000 square feet of space in Mountain View, and leases 285,000 square feet, according to its most recent annual report. Those leases begin expiring in 2018.
Industry sources said that it is rare, but not unheard of, to for a corporate owner to buy a property that is long-term leased to another corporate tenant.
In Google’s case, the play could be twofold: It could see the acquisition as a way to bank property in Mountain View as it waits for the leases to expire, while earning a potentially higher yield on real estate than it would on cash.
It also tracks with Google’s desire to shift toward more of an ownership real estate strategy after being primarily a tenant in its earlier years.
In another property acquisition in July, Google paid $66.7 million for about 200,000 square feet of older industrial buildings in Palo Alto, where it may be considering redevelopment. And last week, I reported on another deal in which Google picked up two R&D buildings from Deutsche Asset & Wealth Management for $16 million.
As of Dec. 31, Google owned about 3.5 million square feet of office and building space near Mountain View, and leased 3.8 million square feet, according to its most recent annual report.
Combined, that is about the entire footprint of the Mission West Properties Inc. portfolio that was sold late last year in the biggest transaction of the year.
Equity acquired the properties when its parent, the Blackstone Group, acquired CarrAmerica Realty Corp. in 2006. It’s difficult to assess the appreciation of the properties, but Carr originally paid $53.6 million, or $407 per square foot, for the Mountain View Technology Center in 2005. That is the project Google paid $82.2 million, or $625 per foot, in last week’s deal.
All of the properties Google bought from Equity are south of the 101 freeway near the Sunnyvale border, in an area thick with R&D buildings. Google has traditionally preferred to stick north of the 101 in the North Bayshore area, where the original Googleplex is located at 1600 Amphitheater Parkway. But it has pushed out in recent years south of 101 and into Sunnyvale.