DRA Puts Two Life Science Buildings in San Jose up for Sale, Pricing Could Reach $50MM

By Jon Peterson

New York City-based DRA Advisors has placed on the market for sale two life science buildings in San Jose located at 5945 and 5941 Optical Court totaling roughly 135,000 square feet. The potential price point on the sale would be around $50 million, or roughly $370 per square foot, according to sources familiar with the sale.

The seller has hired the San Jose office of Eastdil Secured to be the listing agent on the transaction. The people involved in the sale include Greg Cioth and Paul Nelson, both managing directors.

DRA has owned these properties for almost three years; the fund manager had acquired both buildings in September 2017. It bought 5945 Optical for $14.2 million and 5941 Optical for $13.45 million, according to public records.

The properties are 100 percent leased to two companies. Roche Molecular Systems is the tenant in 5945 Optical, and San Jose-based Bio-Cube is the occupant in 5941 Optical. The leases have an average remaining lease term of 8.3 years with no expirations until 2026. This would then allow the new owner to have a significant mark-to-market opportunity.

Both of the buildings are located in a strong geography for life science properties. Other tenants in the same vicinity include companies like Kaiser and Stryker, a medical equipment supplier.

The life science market in San Jose has very strong overall market fundamentals. According to sources that track this market, it is vastly undersupplied at the moment, which has created outsized demand with near zero vacancy rates in its core areas. The limited availabilities and significant rent differentials will likely push tenants further south providing ample growth opportunities for South San Jose.

DRA is known as a commingled fund manager for a variety of pension fund and other institutional investors around the country. Its latest commingled fund is DRA Growth and Income Fund X. The targeted capital raise was $1.65 billion, according to a board meeting document from the Pennsylvania Public School Employees Retirement System. This pension fund has approved a $100 million commitment into the fund.

Fund X is a value-add investment fund. It will be looking to invest capital into a variety of property types including office, industrial, retail and apartments. The strategies employed by the manager to improve the assets will include physical upgrades, proactive asset management, leasing up empty space and capital structure optimization.

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