Pruneyard poised for sale to Ellis Partners for $285M-$300M- Campbell

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San Francisco-based Ellis Partners is in advanced negotiations to acquire the Pruneyard, the high-profile West Valley mixed-use center, from Equity Office, according to sources familiar with the deal and public records.

The price for the Campbell center is believed to be in the range of $285 million to $300 million, according to several real estate sources who have been tracking the acquisition. That would make it one of the larger investment sales this year. We first reported on the Pruneyard being put up for sale back in May.

Two sources said Ellis is believed to be buying the property in partnership withFortress Investment Group, the huge real estate investment firm, said the sources, who don’t have first-hand knowledge of the deal. Fortress is the group that joined with TMG Partners to acquire and renovate a number of former Cisco buildings in north San Jose last year.

It’s unclear how close at hand the deal is, but public records show Ellis Partners on Aug. 12 registered a new limited liability company, EPL Pruneyard LLC, which suggests a deal is most definitely in the works. (It doesn’t, of course, guarantee that a deal will close, and it’s always possible things will go sideways before it is completed.)

The acquisition could make sense for the company. Ellis Partners, headed by longtime Bay Area real estate veteran Jim Ellis, has a reputation for taking on ambitious mixed-use projects, as both a ground-up developer (as with Oakland’s Jack London Square) and a value-add renovator (as at Palo Alto’s Town & Country Village).

Pruneyard’s retail component is similar to Town & Country, with its old-fashioned, red-tile-roof buildings and diverse tenant mix. But it has both a hotel and an office component as well.

The asset includes 253,000 square feet of retail, 365,000 square feet of office and a 171-room hotel. The San Jose office of Eastdil Secured, which was marketing the property, didn’t return a call for comment. Jim Ellis and EOP declined to comment. Fortress didn’t immediately return a call.

Because of the three asset classes at the Pruneyard, it’s unclear how the potential pricing factors out in a per-square-foot or per-room basis. I’ll update this story if I get more color on the deal.

The acquisition is sure to generate a lot of interest because the center is considered one of the more prominent mixed-use projects in the region, given its large size and the surrounding area’s desirable demographics, and is beloved by area residents. It’s unclear what Ellis’s game plan would be; at Town & Country, Ellis invested substantial capital to upgrade the center and bring in higher-end tenants.

The Pruneyard was built in the early 1970s, and grew over time to include the present mix of office, retail and hotel. The 18-story office tower was for a while the tallest building between San Francisco and Los Angeles and remains a West Valley landmark.

Today the Pruneyard’s retail space is 96 percent leased, anchored by a Trader Joe’s,Marshall‘s, Sports Basement and Camera 7 movie theater, plus numerous restaurants including a Rock Bottom Brewing Co. The three office buildings are also 96 percent leased, with 54 percent of leases expiring by the end of 2016 and in-place rents 30 percent below market, according to the offering memorandum. The hotel has recently been upgraded and rebranded a DoubleTree by Hilton.

Nathan Donato-Weinstein covers commercial real estate and transportation for the Silicon Valley Business Journal.