Lane Partners Nearly Doubles Money in Sale of North San Jose Office Project

MARCH 13, 2019

It’s been a little more than a year since the onetime Brocade Communications Systems property in North San Jose traded hands, but in that time the 600,400-square-foot campus has nearly doubled in value to investors.

A Japanese investment and development company, Mori Trust, purchased the three-building, 9.72-acre property at 110-130 Holger Way this week for $429 million, according to Santa Clara County documents. The deal works out to $714.52 per square foot, or about $44 million per acre for the campus.

The seller was Menlo Park-based Lane Partners, which purchased the property from Brocade in December 2017 for $225.5 million, or $375.58 per square foot. The property deal with Brocade was in the works as the tech company prepared for a long-anticipated acquisition by Broadcom Ltd., and closed shortly after the takeover was finalized.

Since then, the campus has been a major boon for Lane Partners. Brocade moved out of the buildings — its onetime headquarters — and within six months Lane Partners had inked a lease with chipmaker Micron Technology for the full campus, which includes one building that can serve as office space or a data center and a five-story parking structure with 1900 spots.

Micron plans to sublease one of the buildings in the near-term, a spokesperson for the semiconductor company told the Business Journal last summer.

But even with a new tenant or two, Lane Partners Principal Mark Murray told the Business Journal last year he didn’t expect that the buildings would need much work. The company primarily invested in landscaping and outdoor amenities, improvements that rang in at around the $2 million mark.

“The quality of the buildings, particularly the interior improvements, are really what drove us to acquire this campus,” Murray told the Business Journal after the company closed on the campus in 2017.

The property, now known as HQ @ First, has been on the market for sale since September, according to industry insiders. Murray did not respond to several requests for comment on the deal this week.

Newmark Knight Frank’s NorCal Capital Markets team advised on the sale, according to a Newmark spokesperson.

Mark Murray, principal, left, and Scott Smithers, managing partner of Lane Partners, at the North San Jose campus last year.

North San Jose’s Rise

North San Jose, once relegated as a space for low-slung industrial and manufacturing buildings, has seen enormous activity when it comes to leasing and sales, drawing major interest from investors and tenants. Apple, Google and Microsoft all own property in the area.

Google has purchased multiple properties in the area in the past year or two, including two newly renovated buildings last October at 4300 and 4400 North First St. for $154.5 million, or about $410 per square foot.

PSAI Realty Partners spent 91.5 million to buy the Gold Street Technology Center where TiVo Corp has long kept its headquarters in North San Jose last summer in a deal that worked out to about $302 per square foot.

And last week, San Jose-based Toeniskoetter Development Inc. closed on a two-building campus at 2460 and 2480 North First St. for $54.1 million, or about $366 per square foot.

While North San Jose has gained significant momentum when it comes to investors, tenants and developers, Mori Trust’s purchase ranks among the most expensive deals on a per-square-foot basis in recent history. But that’s not entirely surprising, says Drew Arvay, managing director for Cushman & Wakefield.

“There tends to be a movement that high-quality real estate with long term income is getting a premium and there’s not a lot for sale,” he said. “The country is hungry for West Coast real estate because they think it has the best value growth.”

The bulk of the Japanese developer’s portfolio is in Tokyo, but Mori Trust entered the U.S. market in early 2017, when it bought two office buildings in Boston for $673 million.