Lane Partners Acquires Brocade HQ Campus in San Jose

DECEMBER 1, 2017

Why it won: Facebook co-founder Mark Zuckerberg and wife Dr. Priscilla Chan’s philanthropic organization has big ambitions, such as a $3 billion push to cure all diseases. It also needs office space and signed one of the Peninsula’s biggest leases in recent years, taking most of 2075 Broadway in Redwood City.

Brocade Communications Systems has sold its San Jose headquarters campus for $225.5 million following a long-anticipated acquisition by Broadcom Limited and a slew of layoffs by the company.

Menlo Park-based Lane Partners on Thursday closed on the 9.72-acre property at 110-130 Holger Way, which comes with three buildings totaling about 600,400 square feet of Class A space and a five-story parking structure with 1,900 spots.

In all, the deal works out to $375.58 per square foot of office and indoor amenity space, or nearly 23.2 million per acre.

Brocade is set to continue leasing the entire property for now, but Mark Murray, principal at Lane Partners, said in an interview Friday that a new tenant could start making improvements to the buildings as early as June.

“We were subject to an NDA until yesterday’s close, so haven’t been marketing the project yet,” Murray said. “We have received numerous unsolicited calls from brokers and users, and expect significant interest now that the deal is public knowledge.”

The Silicon Valley real estate investment and development firm has picked Jeff Arrillaga, executive managing director with Newmark Cornish & Carey, to market the site.

In the meantime, Lane Partners intends to renovate all of the landscaping on the property and construct a new outdoor amenity area between the buildings at 120 Holger Way and 130 Holger Way, which are both seven-story buildings.

Murray doesn’t expect that the inside of the buildings will need much work once Brocade moves out, however.

“The quality of the buildings, particularly the interior improvements, are really what drove us to acquire this campus,” he said. “In today’s construction environment, these improvements would cost a minimum of $200 per square foot to replicate.”

Though Lane Partners is open to leasing the property out to multiple tenants, the campus, completed in 2010 specifically for Brocade, screams corporate headquarters. It has many of the amenities that have become the standard for Silicon Valley tech companies: a full cafeteria with both indoor and outdoor seating, a large fitness center, a game room and an executive business center where Brocade’s C-suite employees once officed. Each meeting room is punctuated with video and sound systems. The buildings are certified LEED gold.

As a bonus, the four-story building at 110 Holger Way also has infrastructure in place for a data center, but the building can also be used exclusively as office space, Murray said.

Lane Partners has an extensive portfolio throughout Silicon Valley, but currently the Brocade campus is its only investment in San Jose. Earlier this year, the group sold a six-building San Jose campus, known as Orchard Commons, for $105 million after picking the property up in 2012 for just $31 million. That nearly 22-acre campus sits along Orchard Parkway sandwiched between West Plumeria Drive and West Trimble Road.

Though the company doesn’t currently have any other properties in San Jose, outside of its newly acquired Brocade campus, Lane Partners Managing Principal Scott Smithers said in an interview Friday that the company has owned eight or nine properties on San Jose’s north side in the 13 years the firm has been in business.

Brocade in transition

As Lane Partners begins reimagining the campus, Brocade is working through its own reinvention.

The property sale came just weeks after Broadcom, also based in San Jose, closed on its acquisition of Brocade and this week laid off 308 employees.

Those layoffs follow 97 layoffs in September, when Jayson Noland, an analyst for Robert W. Bair & Co., correctly predicted to the Business Journal that Broadcom would opt to close Brocade’s San Jose headquarters when the acquisition was complete.

“Avago is a very, very cost-conscious company and it’s not hard to imagine them considering alternatives outside of the expensive Bay Area,” he told the Business Journal in September.

While it’s still unclear where the remaining Brocade employees will end up, Murray says the property is in a prime spot to attract other Silicon Valley companies.

The site, bound by Holger Way and Headquarters Drive, sits in a growing part of North San Jose, adjacent to the @First retail development and two hotels. Both the Hyatt House San Jose and a Courtyard by Marriott sit within spitting distance of the campus.

“While tenants love walkable amenities like this, they remain a rarity in Silicon Valley,” Murray said. “I think this gives the project another big competitive advantage.”