Getting Fabulously Wealthy in Silicon Valley: No Coding Required

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Getting Fabulously Wealthy in Silicon Valley: No Coding Required

Not far from the sprawling Googleplex in Mountain View, California, lies another, less assuming address of Big Tech.

This is Google Building 900—and the internet giant just dropped almost $139 million for it.

The property deal, sealed in April, was just one more in the long, lucrative partnership of John Arrillaga and Richard Peery, the Bill Hewlett and Dave Packard of Silicon Valley real estate.

Unlike Hewlett and Packard—or Bezos or Zuckerberg, for that matter—Arrillaga and Peery are little known outside the Bay Area. But from the start, they’ve been building Silicon Valley, brick by building by office park, as two of the region’s premier developers.

Mountain View Area

Mountain View is home to Google’s headquarters and a Microsoft campus

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Google

Mountain view

Microsoft

Monta Loma

Palo Alto

Medical

Foundation

Jackson Park

Shoreline West

0.5 mi

Google

Combined 75K s.f.

Major tenant: Google

92K square feet

Microsoft

515K s.f.

Palo Alto Med Fdn

106K s.f.

Sselected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Google

Microsoft

Mountain View

Monta Loma

North Whisman

Palo Alto

Medical Foundation

Jackson Park

Shoreline West

0.5 mi

Major tenant: Google

92K square feet

Google

Combined 75K s.f.

Microsoft

515K s.f.

Palo Alto Med Fdn

106K s.f.

Selected developments by:

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Google

Microsoft

Mountain view

Palo Alto

Orchards

Monta Loma

Major tenant: Google

92K square feet

Google

Combined space 75K s.f.

North Whisman

Palo Alto

Medical Foundation

Jackson Park

Shoreline West

0.5 mi

Palo Alto Medical Fdn

106K s.f.

Microsoft

515K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Google

Microsoft

Mountain view

Palo Alto

Orchards

Monta Loma

North Whisman

Palo Alto

Medical Foundation

Jackson Park

0.5 mi

Shoreline West

Major tenant: Google

92K square feet

Google

Combined space 75K s.f.

Microsoft

515K s.f.

Palo Alto Medical Fdn

106K s.f.

Sources: Staff reporting, Google Earth, Microsoft, U.S. Census Bureau
Note: Some properties have been sold since development

More than half a century after the pair began buying up cherry and apricot orchards in what was then Santa Clara farm country, Arrillaga and Peery today represent a rare breed of billionaires in the area: they’ve gotten fabulously rich outside of tech.

The two men, who declined to comment, are worth a combined $6 billion, according to the Bloomberg Billionaires Index. At least two of their contemporaries, John A. Sobrato and Carl Berg, have become billionaires, too.

Read more: The $8 Billion Property Tycoon Who Helped Shaped Silicon Valley

In a region known for fortunes made and lost, the men’s wealth is among the most durable. The tech industry’s massive growth in the last decade has only made their buildings more in demand, sending office values soaring and bolstering Silicon Valley’s real estate riches.

“They are just as innovative and creative as Steve Jobs and other giants of the technology world,” said Drew Arvay, a managing director at Cushman & Wakefield in San Jose, who has done business with all four of the billionaires over his 40-year career. “They continue to lead the market with some of the most influential tenants and developments.”

Cupertino Area

Apple has been a significant client for all four billionaire developers

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Nimitz

Birdland

Neighbors

Cupertino

Calvert

0.5 mi

Major tenant: Apple

856K square feet

Apple

188K s.f.

Apple

105K s.f.

Apple

316K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Nimitz

Birdland Neighbors

Cupertino

0.5 mi

Calvert

Apple

105K s.f.

Apple

316K s.f.

Major tenant: Apple

856K square feet

Apple

188K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Nimitz

Birdland Neighbors

Cupertino

Major tenant: Apple

856K square feet

Apple

188K s.f.

Calvert

0.5 mi

Apple

105K s.f.

Apple

316K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Nimitz

Birdland Neighbors

Cupertino

Calvert

0.5 mi

Apple

316K s.f.

Apple

105K s.f.

Major tenant: Apple

856K square feet

Apple

188K s.f.

Sources: Staff reporting, Google Earth, Microsoft, U.S. Census Bureau
Note: Some properties have been sold since development

The men, who are all in their 80s, started out developing tilt-up buildings that could be constructed quickly, forming the sprawling backdrop to much of Silicon Valley today. As their holdings—and bank balances—grew, they embarked on bigger projects, developing bespoke campuses like Apple Inc.’s One Infinite Loop, built by the Sobrato Organization in the early 1990s and the device company’s headquarters until 2017.

“No doubt I was in the right place at the right time,” Sobrato said by email. In the 1960s, “building costs were under $10 a square foot and monthly shell rents were 10 cents or less per month. Today we have the same land selling for over $100 a square foot, building costs of $300 or more per square foot.”

Apple headquarter at 1 Infinite Loop. Photographer: Justin Sullivan/Getty Images

Apple’s Infinite Loop complex was developed by Sobrato. Photographer: Justin Sullivan/Getty Images

Indeed, Silicon Valley is now one of the hottest real estate markets in the country. The area is home to three of the world’s six most valuable companies—Apple, Google parent Alphabet Inc. and Facebook Inc.—along with many others with voracious appetites for expansion.

“The only thing that can keep these companies from growing is not having places to put employees,” Arvay said.

Asking office rents in Silicon Valley have jumped 35% in the past 10 years, while vacancy rates have fallen from 18% to less than 10%, according to data compiled by Cushman & Wakefield. Values of office buildings have more than tripled since 2010.

Residential real estate has also surged, bolstering landlords such as Sobrato who own multifamily buildings, while contributing to growing inequality, homelessness and tension within local communities. Apartment rents rose 40% in the five years to 2017, according to Trulia, which put the median monthly cost in Santa Clara County at $3,800 in May.

Silicon Valley Vacancy

Vacancy rates in Silicon Valley fallen steadily over the past decade

Office space

R&D space

Q1 1995

2007—08

Financial crisis

Q1 2019

2007—08

Financial crisis

Office space

R&D space

Q1 1995

Q1 2019

2007—08

Financial crisis

Office space

R&D space

Q1 1995

Q1 2019

Source: Cushman & Wakefield

But after nearly a decade of soaring prices, the prospect of a downturn looms. Uber Technologies Inc.’s lackluster initial public offering provided a timely reminder that the seemingly unending money flowing into tech has its limits. Meanwhile, some big companies have taken to developing campuses themselves, while a fresh crop of builders such as Related Cos. have swooped in with their own modernized tech wonderlands.

Peery, Arrillaga, Sobrato and Berg stand out for their longevity in riding out Silicon Valley’s booms and busts.

“Throughout numerous cycles—including the oil embargo in the ’70s, the S&L crisis of the late ’80s and early ’90s, then the dot-com bust in 2001 and the Great Recession in the late aughts—the Valley’s real estate market has mirrored the region’s resiliency,” said Julie Leiker, market director for Silicon Valley at Cushman & Wakefield.

The billionaires’ fortunes have benefited from an ability to time the market. Arrillaga and Peery sold a 5.3 million-square-foot portfolio, reportedly about half their holdings at the time, for more than $1 billion in 2006, ahead of the financial crisis. Their double act is still going strong. In addition to the Mountain View deal with Google—which also involved two other properties—they are building an office complex in San Jose where the search company has agreed to lease 729,000 square feet.

Both Sobrato and his son John Michael Sobrato, who led Sobrato Organization from 1997 to 2013, have stepped away from day-to-day operations. But the family still owns the entire company, which is increasingly investing in residential units. It now has more than 6,500 apartments on the West Coast, in addition to 7.5 million square feet of Silicon Valley office space, according to its website. The family’s wealth has almost doubled in the past five years to about $8 billion, according to the Bloomberg index.

Berg, who declined to comment, sold his Mission West Properties for $1.3 billion in 2012. He’s since largely gotten out of the business, saying in a 2014 interview with Bloomberg that he was “tired of real estate” and now focuses on venture investing.

San Jose Area

Peery Arrillaga is planning a 2 million square foot development in San Jose

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

River Oaks

Milpitas

Various tenants

North San Jose

Vinci North

Google

(Proposed)

Cavium

Major tenant: Cisco

410K square feet

Various tenants

333K s.f.

Google (proposed)

2M s.f.

Cavium

Combined 336K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Morrill

River Oaks

Cataldi

Milpitas

Various tenants

North San Jose

Cavium

Vinci North

Google

(Proposed)

Major tenant: Cisco

410K square feet

Various tenants

333K s.f.

Google (proposed)

2M s.f.

Cavium

Combined 336K s.f.

Selected developments by

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Morrill

River Oaks

Cataldi

Milpitas

Various tenants

North San Jose

Cavium

Vinci North

Google

(Proposed)

Major tenant: Cisco

410K square feet

Google (proposed)

Proposed space 2M s.f.

Cavium

Combined space 336K s.f.

Various tenants

333K s.f.

Selected developments by:

Sobrato Organization

Carl Berg/Mission West

Peery Arrillaga

Morrill

River Oaks

Cataldi

Milpitas

Various tenants

333K s.f.

Major tenant: Cisco

410K square feet

Various tenants

North San Jose

Cavium

Vinci North

Google

(Proposed)

Cavium

Combined space 336K s.f.

Google (proposed)

Proposed space 2M s.f.

Sources: Staff reporting, Google Earth, Microsoft, U.S. Census Bureau
Note: Some properties have been sold since development and not all tenants are current

Philanthropy has become a key part of the billionaires’ endeavors. Sobrato, together with his wife Susan and son John Michael, became the first two-generation family to sign Warren Buffett’s Giving Pledge to leave their estates to charitable efforts. The family has largely focused on the Bay Area region, giving $550 million to philanthropic causes since 1996, according to the billionaire.

“Our current efforts are focused on how our projects can be both profitable and address some of the critical issues facing our region,” Sobrato said. “Our large-scale developments are nearly all mixed-use with both residential and office space. Combining the two reduces traffic, increases sustainability and helps offset the housing affordability issues created by job growth.”

The Peery Foundation supports local schools, while Arrillaga’s most visible gifts have been to Stanford University, his alma mater. His family’s name appears on many buildings across the campus, including a recreation center, gym and dining room.

While Silicon Valley brokers are bracing for a downturn, the next one could be milder than in the past since technology is now embedded in the global economy, said Phil Mahoney, executive vice chairman of brokerage Newmark Knight Frank, who has worked in the region for 35 years. That means more than half a century after they first started, these property moguls are still well-placed.

“They’re doing just fine,” Mahoney said. “They’re all billionaires.”


as per our monitoring this Story originally appeared

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Getting Fabulously Wealthy in Silicon Valley: No Coding Required

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