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Cisco Systems Inc. of San Jose has paid an undisclosed sum to The Irvine Co. of southern California to buy out its lease of 800,000 square feet owned by Irvine in Milpitas.
The deal means that The Irvine Co., which intends to seek new tenants for the space, will likely be able to undercut most and possibly all - competitors in the marketplace, theoretically even offering a period of free rent without suffering financial pain if it so desires, according to a knowledgeable source.
The property also promises to be a formidable competitor in another way when it does come to market for lease, says Mark Schmidt of CBRE in Silicon Valley Irvine is willing to accommodate tenants as small as 10,000 square feet, and those whose needs would require all 800,000 square feet.
Cisco, Silicon Valley's largest private employer, originally leased close to 1 million square feet from Irvine at its McCarthy Center in two separate transactions in mid-2000. It will continue to lease 234000 square feet of the total, or four buildings. Those buildings have been partially subleased to several tenants, including Palm Inc.
The networking equipment maker tried for more than a
year to sublease a larger portion of the complex through Jones Lang LaSalle, the global real estate services and investment management firm, but had little luck. Brokers involved in that effort say they were not at liberty to speak on the record about that or the lease buyout.
Cisco never occupied most of the 19 buildings at the McCarthy Center, nine of which have not been completed on the inside and three of which have only been partially improved. The leases were scheduled to expire from 2005 to 2010, but an Irvine spokeswoman would not attach specific square footages to expiration dates.
Neither Cisco nor The Irvine Co....