While office owners are losing money by selling office properties, Cannae Partners and Blue Vista Capital Management went straight to the bank.
An affiliate of San Francisco and Chicago-based investors has sold a 140,000-square-foot office building at 3011 North First Street in San Jose for $63.6 million – or $14 million more than they paid three years ago, the San Jose Mercury News reported.
The buyer of the one-story building was Klein Investments Family Limited Partnership, based in Newport Beach. The price is $435 per square meter.
Cannae and Blue Vista purchased the site from Sand Hill Property in 2021 for $49.63 million, or $339 per square foot.
The deal represents a rarity among office real estate deals across the Bay Area and the U.S., where office prices have collapsed due to high vacancy rates resulting from the shift to remote work, rising borrowing costs, increasing construction defaults and falling rents.
According to Savills, office prices across the Bay Area have fallen by two-thirds or more, while vacancy rates have risen to as high as 37 percent in San Francisco and 27.5 percent in Silicon Valley.
Klein paid 28.2 percent more for the property than the 2021 trading price. The family office also paid 20.7 percent more than the $52.7 million estimated value at the beginning of the year.
At the time of purchase, the building was fully leased. In March, Cannae and Blue Vista secured a long-term lease extension with the building’s sole tenant, Intermolecular, a subsidiary of Germany-based Merck KGaA.
The company has been based on San Jose’s Renovation Row for more than a decade, providing equipment and services to accelerate research and development for semiconductor and renewable energy companies, the Silicon Valley Business Journal reports.
Palo Alto-based Sand Hill Property bought the 9-acre property in 2015 for $31 million, or $212 per square foot.
Sand Hill had considered converting the site into an urban village with 500,000 square feet of office space, 740 apartments and 14,000 square feet of shops and restaurants, but the company had never submitted a formal proposal to the city.
Klein Investments Family Limited Partnership was founded in 1996 by William and Carolyn Klein, according to government business records.
— Dana Bartholomew
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