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Investors Circle To Scavenge Tech Properties

August 1, 2001

Article by Sheila Muto

Here come the tech-wreck vultures. As a growing number of struggling tech companies look to cash out of their real-estate assets, investors are gathering to take advantage of buying opportunities.

San Jose, Calif.-based Divco West Properties is assembling investments for a $350 million to $500 million fund to acquire properties from high-tech and Internet companies primarily in Silicon Valley, but also in other tech hubs such as Austin, Texas, Boston
and Seattle. The Oregon Public Employees Retirement System has committed $50 million to the fund.

Los Angeles developer Jerry Snyder is launching an acquisition unit of his J.H. Snyder Co., with $50 million to buy commercial property in California. While the specific aim isn't technology-company assets, "we may look at some of the properties being vacated by the tech guys," says Mr. Snyder.

"Everyone that has money to spend is making tech real estate in particular a high priority," says Sandy Presant, national director of opportunity-fund services at Ernst & Young LLP, Los Angeles.

And the opportunities are emerging. Sun Microsystems Inc. is looking to sell its 260,000-square-foot headquarters building and the 12.1 acre parcel in Palo Alto, Calif., it sits on. Others shopping around property: Lucent Technologies Inc., 3Com Corp., Palm Inc.
and Silicon Graphics Inc.

The Carlyle Group, a Washington, D.C., private equity firm, recently bought a nearly 120,000-square-foot Mountain View, Calif., office from Silicon Graphics. The broker for Silicon Graphics wouldn't divulge details, but some estimate the sale price at $230 a square foot, down from $500 a square foot offered last December after the property hit the market.

Still, few deals have been done so far. That's because "the spread between bid and ask [prices] is still pretty high," says Stan Ross, chairman of the University of Southern California's Lusk Center for Real Estate. But amid ongoing softening in the market, he sees buyers coming off the sidelines by early fall.