How Facebook Is Becoming A Real Estate Tycoon

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Location, location, location.

Source: City of Menlo Park public records - (site descriptions by author)

This latest purchase is located next door to its other three major parcels: the current one million square foot East Campus headquarters; West Campus (433,555 SF) scheduled for occupancy Spring 2015; and TE Connectivity campus (10 buildings totaling ~1 million SF) purchased in June 2014, which is currently leased back to the seller.

Silicon Valley - Where Real Estate Is Golden

The social media giant reportedly plunked down another $400 million to buy the 21 building, 56 acre Menlo Science & Technology Park from global logistics giant Prologis, Inc. PLD.

Assuming Facebook will eventually vacate the roads and demolish the existing buildings to create another unique 56 acre campus environment, the cost of the land in 2015 dollars would be $164 per square foot in gross.

Based on recent entitlements that could easily approach close to $400 per square foot per square foot of buildable area just for the land.

Prologis Was Proactive

In the near term, The Menlo Science & Technology Park will continue to be managed by Prologis on behalf of Facebook. However, the Prologis management team had already recognized that this asset with the proper entitlements from the City of Menlo Park would have more valuable uses than its present office industrial configuration.

"Land constraints and increased urbanization pressures in markets such as Silicon Valley support the monetization of select infill assets," said Michael Curless, chief investment officer, Prologis.

"This project and others in our portfolio benefit from our dedicated team who understand how to identify and unlock the intrinsic value in our value-added conversion properties."

Related Link: These Tech Giants Are Driving REITs To 52-Week Highs

The Next Inland Empire?

Bottom Line

Who would have imagined just a few years back that Facebook would become a major Silicon Valley employer and real estate tycoon through monetizing users of its free social network?

In a similar fashion to Midtown Manhattan, well-located real estate in the San Francisco Bay Area/ Silicon Valley is changing hands for top dollar.

Investors would be wise to put REITs with significant property holdings in and around this job creation mecca on their radar screens.

Image credit: Eston, Flickr