By A.D. Pruitt
Mission West Properties, one of the largest office landlords in California’s Silicon Valley, is in talks to sell itself to Divco West, a San Francisco real-estate investment firm, and private equity firm TPG, according to people who have been briefed on the deal.
A deal and pricing terms are not concrete, but the potential suitors and Mission West are in “serious discussions,” the people briefed on the deal said.
Mission West, a real-estate investment trust based in Cupertino, Calif., announced in late December that it planned to put its portfolio up for sale after receiving interest from about 60 private-equity firms, REITs and foreign investors.
The company owns more than 100 office buildings between San Jose and Cupertino, including sprawling research and development campuses that house Apple and Microsoft.
Mission West and TPG weren’t immediately available for comment.
Mission West founder and Chief Executive Carl Berg said during the company’s earnings call July 12 that he was “optimistic” a deal will be sealed in the next 30 days. “We believe we’ve got a very good buyer,” he said. “I think they have every intent to close this deal.”
This is the second time that Mr. Berg has put the company up for sale. In 2007, Starwood Capital Group agreed to pay $1.8 billion for the company. But the deal fell through a week before closing when lenders pulled out as the housing market began to sink.
Mission West’s portfolio is only about 70% occupied, which is below average for the area. Even though it owns some of the strongest property in Silicon Valley, a large portion of its portfolio remains battle-scarred from the technology bust a decade ago.
Anthony Paolone, a J.P. Morgan analyst, values Mission West’s portfolio at roughly $1.4 billion, including over $300 million in debt.
He said the final price tag could fall short of that amount given the portfolio contains lower quality properties and is geared to research and development at a time when many tenants are seeking traditional office space.
Mission West shares closed up Friday .92% to $8.76 and are down 2.8% since the beginning of the year.