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Mission West negotiating $1.8bn sale to private equity fund

In what could be the largest commercial property deal in Silicon Valley history, the Mission West REIT is in sale talks with an undisclosed private equity fund reported to be Connecticut-based Starwood Capital Group.

Cupertino, California-based Mission West Properties is in acquisition negotiations with an unnamed private equity real estate fund for the purchase of the company’s outstanding common stock at $13.55 (€9.83) per share.

Although Mission West did not disclose the name of its potential buyer, local press reports indicated it was in negotiations with Starwood Capital Group, the Connecticut-based real estate investment firm affiliated with luxury hotels entrepreneur Barry Sternlicht. 

Mission West, a publicly listed REIT based in Silicon Valley, currently manages 107 properties totaling 7.7 million square feet of research and development space and boasts tenants like Microsoft, NEC Electronics America, Ciena Corporation and Apple Computer.

In a widely reported conference call last quarter, Carl Berg, chairman and chief executive officer of Mission West, said he had grown tired of complying with the new accountability regulations under the Sarbanes-Oxley Act of 2002.

“The auditors tell us how to run the company,” Berg said in the call. “That’s what it really boils down to. Everything we do, they think they have a say in.”

In addition to his real estate investments, Berg is also heavily invested in high-tech companies including the consulting firm International Network Services, which he bought from Lucent Technologies in 2002.

The transaction, if successful, would reportedly be the largest commercial property sale in Silicon Valley history. The previous record-holder was RREEF’s $1.1-billion purchase of Peery-Arrillaga’s 5.3 million-square-foot office portfolio last year.