San Jose-based Divco West Properties is preparing to raise a fund of around $600m to invest in internet-related property in what would be the first vehicle of its kind for this sector.
Divco, which describes itself as “the real estate partner for the new economy” is a heavy investor and developer in the Bay Area of San Francisco, which is a popular choice for internet and IT-related firms.
The raising of such a fund would have implications for Europe. If successful in raising the equity, it would give the sector credibility as an investment product, despite the unpredictable nature of the high-tech sector. With Divco prepared to follow tenants to strategic locations in the US, it is also seen as likely that the fund would move into core European markets such as London and Amsterdam.
At first the fund is expected to concentrate on the San Francisco area where demand is outstripping supply, and is seeing an explosion in rents. Rents in the CBD have risen 26% in the last year, according to CB Richard Ellis and stand at around $696 per m2 a year.
Equity in the fund is expected to reach around $300m with likely investors expected to be venture capitalists and private high net-worth individuals.
Divco was founded by Stuart Shiff and David Taran in 1993. The firm focuses on properties in high-tech markets and has acquired 854,700m2 of property and 283ha of land. The company is building a 613,150m2 campus for Cisco Systems in Coyote Valley in San Jose.
The company likes to see itself as more of a partner to its tenants and considers arrangements such as partial rent-for-shares payment methods.
