475 & 535 Oakmead Parkway are two one-story office/R&D buildings totaling 112,310 square feet, located on adjacent parcels in Sunnyvale.
Situation
In 2007, Orchard Partners purchased 535 Oakmead from RNM Properties.
The acquisition of 535 Oakmead included a “ROFR” option to purchase 475 Oakmead from a separate corporate seller.
Orchard Partners exercised its option to purchase 475 Oakmead shortly after closing on the 535 building, thus averaging down the total cost basis of both buildings.
At time of purchase, the 535 building was leased with 3 years remaining to McAfee while the 475 building was 100% vacant. The vacancy and short-term lease at the time represented a significant value creation opportunity in a rising market.
Both buildings required significant market ready work.
Results
Immediately upon acquisition of 475 Oakmead, Orchard Partners executed a $1.98 million “market ready” upgrade plan. The building was subsequently leased, in a difficult leasing environment in 2009, to Alpha & Omega Semiconductor (NASDAQ: AOSL).
Following its lease expiration in 2010, McAfee decided to vacate 535 Oakmead in order to consolidate in their headquarters in Santa Clara, leaving the 535 building vacant.
Orchard Partners performed upgrades to the lobby, façade and landscaping of 535, significantly increasing its market appeal.
Orchard Partners leased 535 Oakmead to Palo Alto Medical Foundation on a long-term lease.
Shortly after execution of the leases, Orchard Partners sold the respective properties, one to an institutional real estate investor and the other a private family trust that was directly sourced by Orchard itself, at market-leading cap rates.
