Hidden Billionaire Emerges Amid Silicon Valley Tech Boom

June 26 (Bloomberg) -- Tai Hui, chief Asia market strategist at JPMorgan Asset Management, talks about U.S., Japan and Taiwan's technology companies. Hui also talks about the U.S. economy. He speaks in Hong Kong with Angie Lau on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

The construction site at 181 Fremont St. in downtown San Francisco is home to the deepest foundation ever laid in the city’s history. The base will support a 54-floor tower, which, when completed in 2016, will be the Bay Area’s second-tallest building.

The structure is the first major property developed in San Francisco by real estate tycoon Jay Paul, who’s become a billionaire creating some of Silicon Valley’s most sought-after corporate campuses. His tenants include Hewlett-Packard Co., Microsoft Inc. and Amazon.com Inc.

“He’s made a killing anticipating where the market would go,” said Garrick Brown, director of research at Cassidy Turley. “He always seems to be two steps ahead. Timing is everything in commercial real estate.”

Such prescience has propelled Paul into the top tier of Bay Area developers, alongside billionaires John Sobrato, Carl Berg, John Arrillaga and Richard Peery. The 66-year-old has a personal fortune of at least $1 billion, according to the Bloomberg Billionaires Index, and has never appeared on an international wealth ranking. He declined to comment on his net worth.

Paul helped redefine the Silicon Valley office park, building high-end developments loaded with the amenities such as spas and athletic facilities that have become a staple on the campuses of the industry’s most valuable companies.

Photographer: Tony Avelar/Bloomberg

The Moffett Towers complex in Sunnyvale, California. Close

The Moffett Towers complex in Sunnyvale, California.

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Photographer: Tony Avelar/Bloomberg

The Moffett Towers complex in Sunnyvale, California.

Climbing Wall

He rose to prominence building the Pacific Shores Center, a 1.7 million-square-foot (158,000-square-meter) office campus in Redwood City, California, that features a 1,500-seat outdoor amphitheater, sports fields and a 25-foot (7.6-meter) climbing wall. The project was completed in 2002 and sold for more than $800 million four years later.

Another signature project was the 1.8 million-square-foot Moffett Towers in Sunnyvale, a group of seven buildings in the heart of Silicon Valley. The property includes a swimming pool, outdoor spa and billiard room. In the same town, Paul’s developing Moffett Place, a six-tower complex that will feature a basketball gym, onsite cafe and outdoor training zone.

“He was ground-breaking at Pacific Shores, then again at Moffett Towers and now Moffett Place with his amenities and campus-centric developments,” said Phil Mahoney, executive vice president at Santa Clara, California-based Cornish & Carey Commercial Newmark Knight Frank who has been a broker for Paul since 1985. “It’s very hard to emulate. Even some of the best of his competitors shake their head at the sort of quality that he builds. He will spend more than anyone on the buildings.”

Photographer: Tony Avelar/Bloomberg

The Transamerica Pyramid in San Francisco. Close

The Transamerica Pyramid in San Francisco.

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Photographer: Tony Avelar/Bloomberg

The Transamerica Pyramid in San Francisco.

Soaring Demand

Outfitting corporate campuses with volleyball courts and other trappings that technology companies offer to lure and retain talent has paid off. Demand for premium space in Silicon Valley has surged since 2011, and commercial leases there are 57 percent higher than the national average, according to property broker Colliers International.

In the first quarter, asking rents in the Mountain View market -- the Valley’s epicenter -- rose 55 percent from year-before averages, an April report by Colliers said.

The market is even hotter in San Francisco, where Paul is making his first foray with 181 Fremont St. The city is the best-performing U.S. office market, with technology firms driving four years of record leasing that’s pushed office occupancy to an all-time high of 70 million square feet in the first quarter, according to CBRE.

“It is impossible to walk more than 10 feet without almost bumping into someone wearing a startup hoodie or t-shirt,” said Andy McLoughlin, co-founder of cloud collaboration service Huddle Inc., whose office in the city’s South of Market district is less than a mile from Fremont Street and not far from Foursquare Labs Inc., Airbnb Inc. and Uber Technologies Inc.

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‘Most Expensive’

“SOMA is now the most expensive neighborhood in San Francisco,” he said. “Just more than a decade ago, much of it was a desolate landscape of empty warehouses and low-rent shops.”

The origins of Paul’s 10-figure fortune began more than four decades ago, when the Rhode Island native was sent to southern California to rescue his father’s troubled investments in failing thrift banks.

He settled with his father’s creditors in 1975, and formed Jay Paul Co., which he used to buy up inexpensive office properties in places such as Long Beach, California. Over the next four decades, the closely held company developed more than 8 million square feet of commercial property, according to its website.

‘Amazingly Efficient’

“It’s amazingly efficient,” Mahoney said of the company. “They handle a lot of transactions and tenants with a very small number of people. He’s got excellent people in his organization. They’re pros.”

Jay Paul Co. has 4.1 million square feet of projects in the pipeline, according to its website. The developments include 181 Fremont and Harbor View, a trio of eight-story towers in Redwood City. It also will add another 2.5 million square feet in office space to Moffett Place and Moffett Gateway in Silicon Valley.

“Moffett Towers went up right before the bottom fell out of the economy,” Cassidy Turley’s Brown said. “Suddenly, a year after the bottom seemingly fell out, demand returned and there was nowhere to go except his development. What looked like a disaster to many people at the beginning turned out to be perfect, genius timing.”

After the complex sat near-empty for months, Motorola Mobility LLC, Hewlett-Packard and Microsoft leased more than 860,000 square feet of space in early 2011. Amazon.com followed a year later.

Getty, Ellison

Outside of his real estate business, Paul’s assets include a San Francisco mansion he bought for $28 million in 2012, half the $55 million price it was listed at five years earlier. The estate is perched above the homes of billionaires Gordon Getty and Larry Ellison in the city’s prestigious Pacific Heights district.

Unlike his more famous neighbors, Paul keeps a low profile and rarely gives interviews.

“He’s a very private person,” Mahoney said. “He just wants to do what he does well and be left alone and enjoy his life privately. He’s the antithesis of Donald Trump.”

To contact the reporter on this story: Tom Metcalf in London at tmetcalf7@bloomberg.net

To contact the editors responsible for this story: Peter Newcomb at pnewcomb2@bloomberg.net Robert LaFranco

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