The owner behind a trio of Silicon Valley buildings leased entirely to iPhone maker Apple is testing the region's turbulent office market with a move to list the portfolio for sale.
New York-based investment firm TriCap, the tech giant's landlord for the three buildings in Sunnyvale, California, listed for sale the nearly 350,000-square-foot portfolio that will serve as a litmus test for how powerful Apple's tenancy is in terms of landing a buyer willing to put in the highest bid, according to people familiar with the effort.
The listing is expected to land a sales price between $270 million to $350 million, a range that could result in as much as $1,000 per square foot.
Newmark has been hired to help market the portfolio, including buildings at 410, 420 and 430 N. Mary Ave., about 6 miles north of the company's Cupertino headquarters. TriCap did not immediately respond to CoStar News' requests to comment.
The firm bought the buildings in early 2017 from Rockwood Capital. Records indicate TriCap paid $290.7 million for the portfolio that was fully leased to Apple at the time.
Apple initially moved into the building at 410 N. Mary Ave. in March 2013, according to CoStar data. It later signed leases to expand to the other two adjacent properties, all of which were developed in the late 1980s.
Signaling a turnaround
Sales of single-tenant, tech-leased properties have long played a significant role in helping to prop up Silicon Valley's investment activity. Tech tenants including Apple, Alphabet's Google and Meta provided a source of reliability and certainty for investors in an otherwise turbulent market, and properties with long-term leases in place have commanded some of the highest prices in the South Bay area.
Lingering impacts of the pandemic, however, coupled with many tech companies' efforts to downsize their real estate portfolios, has meant some buyers have stuck to the sidelines as they wait out any market uncertainties.
Given its role as one of the most concentrated tech hubs in the world, Silicon Valley's office market has been especially hard hit by the industry's widespread downsizing and weakened demand.
While leasing has rebounded slightly after hitting a post-pandemic trough last year, the regional availability rate is stuck at about 25%, according to CoStar data, and rents have fallen from their pre-pandemic highs of more than $80 per square foot to the current average of roughly $68 a square foot.
Yet with Apple's long-term tenancy in the buildings, the portfolio could serve as a benchmark for the market's valuation rebound as it tries to rebuild some of its pre-2020 momentum.
Investment sales have slowed considerably over the past year and a half, according to the data, with buyers collectively funneling less than $1.5 billion into the greater Silicon Valley area over the past year. That's a far cry from the region's pre-pandemic annual average of nearly $3 billion, yet there have been recent signs that activity will gain some speed through the remainder of the year.
Fellow tech giant Microsoft, for example, earlier this month closed a more than $330 million Silicon Valley deal to acquire a campus in the nearby Silicon Valley suburb of Mountain View, California, a sale many stakeholders saw as a sign of the tech giant's long-term commitment to physical space.