TBI ACQUIRES THREE CAMPBELL BUILDINGS

Toeniskoetter & Breeding, Inc. Development has acquired three adjacent office buildings located between Winchester Boulevard and Camden Avenue in Campbell. The three one-story buildings at 743, 745 and 747 Camden Ave. total 61,056 square feet and were acquired from a partnership owned by the family of the late Howard J. White III, Vice President Dan Amend of TBI Development announced.

DAN AMEND NAMED DIRECTOR OF CHILDREN’S DISCOVERY MUSEUM

Daniel T. Amend, Vice President of Toeniskoetter & Breeding, Inc. Development (TBI Development), has been appointed to the Board of Directors of the Children’s Discovery Museum. Mr. Amend also has joined the museum’s Committee on Exhibits & Programs, which is developing the “Art Loft,” a new art studio for children 4 to 10 years old for which TBI is making a significant contribution.

SURF CONTROL LEADS ACTIVE SCOTTS VALLEY LEASING
TBI Development seeing office market strengthening

SCOTTS VALLEY – Toeniskoetter & Breeding, Inc. Development has signed several leases involving more than 100,000 square feet in Scotts Valley, including the most recent and largest with SurfControl. A web and e-mail filtering company, SurfControl took occupancy in mid-September of its new, 42,571-square-foot U.S. headquarters at 5550 Scotts Valley Drive.

SurfControl is a British company headquartered near Manchester that derives 65% of its revenue from the United States. The Scotts Valley office, which opened in 1998 with three people, has grown to 160 employees. SurfControl has been located in the multitenant Enterprise Technology Centre (ETC), the former Inprise/Borland corporate campus at 100 Enterprise Drive.

In addition to the SurfControl lease transaction, TBI Development has recently completed deals with Cenus Technologies, a leader in advanced networking capabilities, which has moved from 5550 Scotts Valley Drive to another Scotts Valley building in the TBI portfolio, 10 Victor Square. Now doing business as Adara Networks, the company focuses on application level routing in 4,200 square feet of space leased for five years.

Also at 10 Victor Square, Vertical Circuits Inc., a developer of memory products with military, aerospace and commercial applications, renegotiated and expanded its lease into a 23,000-square-foot office and production facility.

At TBI Development’s Granite Creek Business Center, Invivodata, Inc., a Pittsburgh, Pa.– based company that provides computer-based patient diary systems for clinical testing, leased 3,659 square feet of space. Versalite Power, Inc., a distributor of forensic lighting based in Salt Lake City, leased 3,445 square feet, and earlier this year, ESS Technology, Inc., a Fremont-based supplier of chips for DVD and digital entertainment markets, leased 9,945 square feet of space for its Digital Imaging Division. The division is developing technology related to picture phones.

In addition, TBI Development leased 22,843 square feet at 5617 Scotts Valley Drive to Cisco Systems for five years. The San Jose-based Internet networking company had previously leased this space in the Granite Creek Business Center and elected to remain after a site search that included up to a dozen other Silicon Valley locations.

“For most of 2002 and 2003, the leasing market in Scotts Valley was at a virtual standstill,” said President Brad Krouskup of TBI Development. “Companies began looking around again early this year, and the market appears to be gaining strength.”

Kevin Blakeman, SurfControl’s President of the Americas, said the new headquarters building offered one of the few places locally where the company could meet its growth needs.
“We were very keen on staying in Scotts Valley,” he said. “We like the area. This was the only location we could find that offered the right size, services and amenities, plus it has excellent freeway access.”

Jeff Nochimson, a broker with Colliers International who represented both TBI and SurfControl, said the lease transaction involved not only one of the largest companies to relocate in Scotts Valley, but also one of the strongest financially. The company announced record profit and sales of $11.5 million and $87.3 million respectively in the fiscal year ending June 30. Its web filtering, messaging security and anti-virus technology competes in a rapidly growing market now estimated in excess of $3 billion.

SurfControl is relocating to obtain an open floor plan that better suits its organizational needs and provides room to grow, Nochimson said. Although it will be able to save some money, the primary motivation was not financial, he said.

Matt Shelton, a broker with J.R. Parrish in Santa Cruz, attributed the growing leasing activity to technology entrepreneurs forming new companies. “The recession has run its course,” he said. “Tenants have stopped leaving, and we are not having the kind of layoffs, packing up and moving out of town that we did before. Now we are doing good leasing activity, but most of the deals are relatively small.”

SurfControl moving from ETC to 5550 Scotts Valley Drive is a significant event that is good for the real estate market, Shelton said. “The move shows that companies recognize they have sound reasons for selecting a location outside the ETC campus,” he said. “Instead of being one tenant in a campus, companies can get their own buildings with identities on them and a parking lot in front of the door. For identity and becoming part of the overall community, SurfControl made a good decision.”

Krouskup said SurfControl also considered several relationship issues in its relocation decision. These included TBI Development having owned its Scotts Valley properties for more than 20 years and its strong relationships with city government, building contractors and vendors. TBI Development also includes an award-winning property management division.
Downtown Santa Cruz and Scotts Valley constitute the core office markets in Santa Cruz County, and start-up companies have historically and currently been the major users of office and R&D space. The local operations of large companies often are the result of acquiring these young companies. Cisco Systems, for example, acquired TGV Software, Inc., which was located in downtown Santa Cruz and expanded to the Granite Creek Business Center. Nokia bought Network Alchemy in Santa Cruz and continues to lease 60,000 square feet of space. ESS acquired Pictos Technologies, Inc., whose operations are now part of the Digital Imaging Division in TBI’s Granite Creek Business Center.

Krouskup said the new leases leave only 16,793 square feet still available in TBI Development’s total portfolio of 200,000 square feet of office and R&D space in Scotts Valley. Overall, the TBI portfolio of 2 million square feet of space is 98% leased, a remarkable success in Silicon Valley, where vacancies exceed 20% in many markets.

Founded in 1983, TBI Development has developed more than 2.5 million square feet of buildings and serves as managing general partner for a number of diversified real estate properties throughout Santa Clara and Santa Cruz counties. These developments include the 140-acre, 1.3-million-square-foot Madrone Business Park in Morgan Hill, the adjacent, 30-acre Cochrane Business Ranch and property in Santa Cruz as well as Scotts Valley. Other TBI holdings include 450 West Santa Clara Street, the O’Connor Health Center and the western headquarters for Integrated Circuit Systems, all in San Jose; and Gateway Square in Campbell.