It may be the most valuable company on the planet, but iPhone maker Apple is always hunting for a discount, especially when it comes to expanding its vast real estate portfolio.
The Silicon Valley tech giant — the first company to have its stock market value reach $3 trillion — is taking advantage of declining property valuations near its headquarters in Cupertino, California, by acquiring a vacant office building at a discount to the price for which it last sold.
Apple paid $70 million for the roughly 160,000-square-foot property at 10200 South De Anza Blvd., according to Santa Clara County Recorder’s Office filings.
The price tag equates to more than $435 per square foot and is about 35% less than what the seller, Rubicon Point Partners, paid for the building four years ago. The San Francisco-based investment firm acquired the Ten200 property for $107.5 million in June 2019 as part of a sale-leaseback deal with hard-drive maker Seagate Technology, which occupied the site at the time, according to CoStar data.
Seagate vacated the property, located about two miles from Apple's Cupertino corporate home, shortly after Rubicon bought the building. It was empty when Apple bought the property in an all-cash deal late last month, according to CoStar.
Apple's plans for the site aren't clear. The tech company did not immediately respond to CoStar News' requests for comment.
Prices Go Downhill
Silicon Valley has been largely insulated from some of the challenges plaguing nearby real estate markets such as San Francisco. However, a combination of widespread layoffs, depressed leasing activity and overall economic uncertainty with increasing interest rates has spooked potential buyers and disrupted the office market and building values.
In June, LinkedIn, the Microsoft-owned social networking company, sold its property at 880-888 W. Maude Ave. in Sunnyvale, California, for $23 million, according to documents filed with the county. The price was only slightly above the $22.4 million LinkedIn paid for the building in late 2015.
"It's a unique deal, of course, because the buyer is Apple, the world's most valuable company," said Nigel Hughes, CoStar's director of market analytics for the San Francisco Bay Area. The building is "in their backyard, and they own or occupy almost everything in Cupertino, so this is a no-brainer acquisition. Apple is getting this building for less than it would cost to build."
Before Apple bought the Ten200 building, investors had collectively spent less than $74 million to acquire properties in the Cupertino area over the past year, according to CoStar data. That figure is far below the more than $322 million reported over the same time a year ago.
Deal volume across the San Jose market, which includes Silicon Valley's top-tier suburbs, has slowed as investors contend with rising interest rates and the threat of a recession, according to CoStar Market Analytics. As of June, about $1.4 billion of sales among flex properties in the region closed over the past year, about half of the average annual sales volume over the past five years.
Yet for buyers such as Apple, the downturn is not only a chance to scoop up properties at a steep discount, but also is a bet on the region's anticipated recovery.
Apple is one of the few tech giants still adding space. This year it leased a roughly 150,000-square-foot building at Kilroy Realty's Mathilda Campus in Sunnyvale, California, adding to its roster of office and flex properties near its headquarters.
It is also finalizing plans to open, relocate or remodel upward of 50 stores over the next four years in a bid to freshen up its retail brand more than two decades after debuting its first store. The strategy underpins the company's commitment to invest heavily in its real estate even as other tech firms look to cut costs elsewhere.