By Vladimir Bosanac

As the city of San Jose continues to gain real estate traction, another deal for a two-building complex totaling 411,000 square feet is in the process of getting finalized for a reported $128 million, or just over $311 per square foot. This deal has not closed, yet, so final terms may be subject to change.

The Toronto-based Brookfield Asset Management is the reported buyer of the two-tower Towers @ 2nd, Class B high-rise office towers built between 1972 and 1974. The properties were acquired for the company’s Brookfield Strategic Real Estate Partners II fund, a commingled fund of more than 100 institutional investors, including sovereign wealth funds, financial institutions and public and private pension plans that closed in April of 2016 with $9 billion of equity commitments. The seller is a partnership between Dallas-based Invesco Real Estate and Emeryville-based Harvest Properties. The deal was first reported by Hedge Fund Alert.

Invesco had purchased the property in 2015 for its value-add comingled fund. The sale price at the time was $61.7 million, or roughly $150 per square foot.

The two properties are located at 75 E. Santa Clara Street & 4 N. Second Street in downtown San Jose. Invesco and Harvest purchased the asset in June of 2105 for $62.2 million from Foster City-based SteelWave and invested another $11.1 million into rebranding the asset by repainting both buildings, completing lobby modernizations and entries and installing a best-in-class amenity space featuring an outdoor plaza, expansive fitness center with private showers and lockers, arcade lounge, training and conference center, VIP lounge and bike storage. At the time, the property was only 50 percent leased, and the partnership was able to bring that figure up to around 62 percent today. It is estimated that the tenant roll is presently leasing the building around 22 percent below market rates, so Brookfield is looking to gain a good amount of value-add at the property in the future.

The buildings do have some cache. In 2016, WeWork took 73,000 square feet in the property on a 15-year lease. Along with them, the San Jose Mercury News is headquartered in the building at 33,000 square feet. Other tenants in the buildings are Environmental & Occupational Risk Management, which has 13,000 square feet, as well as Dealer CMO at 11,000 square feet and Excel MSO with the same amount of space.

Benefits in the property include a parking garage under each building and proximity to San Jose City Hall and the San Jose State University campus.

CBRE is representing the sellers in the transaction.