Innovative Marketing and More Than Five Years of Hard Work Pay Off at Junction Office Center
Highlights
• Completed a sellout of 52 office condo units totaling 77,400 sq. ft. of space over 5 1/2 years through the most severe recession in 75 years
• Invested $10 million to acquire a bank-owned R & D/manufacturing complex and convert and completely renovate the two-building, two-story office condo complex
• Managed an innovative marketing program that included a project-specific web site, well-read blog and TEAM Junction – a unique business acceleration, mentoring and leadership development group available at no charge to CEOs and business owners at Junction
• Met its commitments to the investors’ group and condo owners to close out the entire project
It began simply enough. In 2005, Borelli Investment Company acquired a dilapidated REO (bank-owned) two-building, two-story R & D/manufacturing complex located in San Jose’s “Golden Triangle” – a highly desirable business area created by the intersections of I-880, Hwy 101 and Hwy 237. Borelli converted and extensively renovated the buildings to create Junction Office Center – offering high-quality office condos with from 750 to 3,000 square feet of space.
The first sale of an 1,840 square foot unit closed in December of 2005. Additional sales followed quickly. But what no one could foresee was that the Great Recession was waiting ahead.
Challenge
The initial challenge was to upgrade a rundown property that had been vacant for months. Borelli Investment Company assembled an investor group to raise the $10 million debt and equity required to purchase and renovate the 77,400 sq. ft. complex.
The buildings were redone, inside and out. New roofs. Stunning glass lines that included 48 new window openings. New heating and air conditioning units. Fresh paint everywhere. Extensive new landscaping, including in the attractive central courtyard. Awning-covered entrances to formal lobbies with granite floors and high ceilings. Completely redone hallways and doors to the individual suites. Large, multi-stalled restrooms. Upgraded elevators. ADA improvements. Common conference room. And top-quality suites with full carpeting, finished walls, coffee bars, individual controls for heat and air, and separate utility metering.
Five sales were closed in 2005; 19 more units were sold in 2006 and 13 condos were sold in 2007. By early 2008, with additional prospects actively looking at some of the remaining 15 units, a sellout by 2008 appeared likely.
But the Great Recession changed that. Sales slowed to a virtual halt as businesses grew cautious about space commitments and owner financing dried up. And Borelli Investment Company was forced to devise a new plan.
Solution
While some developers may have walked away or hunkered down, hemorrhaging cash – Borelli Investment Company remained committed to seeing the project through to its successful completion.
Initially, Junction Office Center’s marketing included a mix of traditional media such as brochures, postcards, newsletters, and print ads – together with innovative new media such as a project-specific micro-web site and e-mail blasts with timely information to customers and prospects.
But when that wasn’t enough, Borelli got even more creative. Bolder e-mails with lots of photos and graphics. A lighthearted, informational blog that attracted a remarkable number of regular visitors. Then,TEAM Junction – a business-acceleration, mentoring and leadership development group run by a certified chairperson from Vistage International, the world’s leading CEO group – offered free to all condo owners.
Results
Finally, sales began to inch forward again. By Spring 2009, 80% of the condos representing nearly 90% of the available space had been sold. Drifting prices again sent some buyers to the sidelines. But one by one, with the dedicated, diligent efforts of Borelli’s sales agents, the remaining condo units were sold.
The last sale of a 1,943 sq. ft. unit was closed in May 2011 – just under 5 1/2 years after the first one. The price was around 30% less than that first sale – impacted by the dramatic changes in market conditions – even though the last unit was larger by 100 sq. ft. But the complex was a sellout.
Borelli is proud of its ability to complete a project such as Junction Office Center in the most challenging economic environment in more than 75 years – providing an attractive return to investors and offering substantial tax advantages and the prospect of significant long-term appreciation for the businesses purchasing Junction condos.
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HIGHLIGHTS
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Successful development often requires multiple abilities: the vision to see the best use for a property, assembling investors to raise needed capital and working closely with the city to remove zoning limitations, engaging the right architect and contractor, and applying strong marketing skills.
Borelli Investment Company was the one of the first real estate firms in Silicon Valley to recognize the opportunities in developing business condominiums, which offer smaller enterprises the advantages of commercial property ownership. At Ringwood Business Center, Borelli applied its experience in innovative ways.
CHALLENGE
In the summer of 2003, a six-building corporate campus in North San Jose’s International Business Park was being sold. Lost in the transaction was a five-acre parcel of land at the end of a cul-de-sac.
The five-acre sale required a fast close. Borelli Investment Company quickly assembled an investor group to raise $2 million in capital and made an offer. Helped by a close relationship with owner, South Bay Development Company, Borelli was able to purchase the land.
The next challenge was to amend the existing zoning for research and development to include other commercial uses as well. Meticulous follow-up secured the desired entitlements within approximately six months.
SOLUTION
Building on its experience in converting Berryessa Industrial Center into industrial condominiums, Borelli Investment Company and architect, Kenny Rodriguez, designed Ringwood Business Center, a three-building business condominium complex totaling 72,220 square feet of space. Ringwood features a “Main Street” design and single-story buildings that allow easy access. Quality exterior touches and attractive interior finishes distinguish the space from other alternatives.
As part of its efforts, Borelli conducted focus groups with brokers specializing in space for smaller businesses. Applying this knowledge, the company built a mix of large and smaller business condominiums, offering from 750 to 3,503 square feet of space for both office and industrial uses.
RESULTS
Six months of fast-track construction by South Bay Construction had the complex ready to be occupied by November 2004. Sales were brisk from the start. In addition to the expected buyers, CPAs, attorneys, mortgage companies, real estate brokers, and other professionals showed strong interest. Within 90 days, more than 80 percent of the units were either sold or in escrow-ensuring an early sell-out.
There had even been one resale by a company that moved to a bigger unit at Ringwood-and made a handy high five-figure profit in about six weeks. Borelli Investment Company’s precision execution of the business condominium concept at Ringwood further reinforces the company’s position as an “expert” in the category, and rewards investors with continued healthy returns on their investment.