San Mateo County is now leasing both Circle Star office towers to an offshoot of Softbank, the telecom company which owns a majority of Sprint Nextel and is already committed to occupying one of the San Carlos buildings.
In April, SoftBank Corp. contracted to rent out the 103,948-square-foot tower at 1 Circle Star Way. On Tuesday morning, the Board of Supervisors is expected to sign off on a lease for its 103,904-square-foot sister property, 2 Circle Star Way. The second lease is estimated to bring in $3.25 million annually after the county recoups its up-front costs for improvements and $1.42 million broker fee. Taken with the first building’s lease, the county stands to rake in more than $6 million in yearly revenue.
“It is absolutely a good deal. With both leases running concurrently for seven years we should net out more than $30 million,” said County Manager John Maltbie.
Softbank’s lease for 1 Circle Star included right of refusal for the second building which it exercised after another firm in June signed a letter of intent to lease three floors. Softbank countered with a proposal to lease all floors minus the 44-square-foot control room for the electronic billboard.
Maltbie said he understands the second building will be populated not with Softbank itself but other technology firms with which it is aligned.
The 82-month lease expires in May 2020 with the option of extending it another 34 months with the rent adjusted to 100 percent of the prevailing market rate.
The county purchased 1 and 2 Circle Star Way, two four-story office buildings plus parking, for $40 million two years ago as a way to escape pricey leases for several departments and relocate 911 dispatch. However, officials ultimately decided leasing the buildings was a more financially prudent choice, particularly because making Circle Star compliant for dispatch would cost more than constructing an entirely new building.
Maltbie said comparing whether the county leasing the buildings or relocating its own departments is the better financial deal is “comparing apples and oranges.” Maltbie said the original plan for the buildings was conceived when the county had much greater space needs but has since downsized.
“Our needs changed dramatically,” Maltbie said.
The lease with the county is actually Starburst 1, Inc. a subsidiary of SoftBank Corp. In October, SoftBank announced plans to acquire 70 percent of Sprint Nextel for $20.1 billion. CEO Masayoshi Son is also rumored to have purchased a 9-acre Woodside estate on Mountain Home Road that at the time made it the most expensive private residence on record in California and potentially the nation.
The Board of Supervisors meets 9 a.m. Tuesday, July 23 in Board Chambers, 400 Government Center, Redwood City.
(650) 344-5200 ext. 102