By Jon Peterson
New York City-based New York Life Real Estate Investors has paid $30.3 million or $233 per square foot to buy the 130,000 square foot 2665 North First Street office building in North San Jose.[contextly_sidebar id=”f1EKnvyR6MiGAqqIKxlCRNGpIBBsvOn4″]The institutional investor out of its San Francisco office on One Front Street acquired the property in a venture through its operating partner, San Rafael-based Seagate Properties.
“We think that this property represents a very strong releasing opportunity. There is around 50,000 square feet with the property where the leases will be coming up for renewal this year. A good portion of the overall space in the property is 30 percent to 40 percent below market,” says Wick Polite Jr., a principal for Seagate.
The property may have some movement from one of its major tenants. This would be Samsung, which currently occupies around 40,000 square feet in the building. “This tenant has talked about either maybe moving out of some of the space it occupies now or possibly increasing some space for some of its divisions within its company,” said Polite. Other tenants in the building include McCarthy Building Companies, two entities from the State of California and a mix of technology and professional service firms.
2665 North First Street was first developed in 1985. When the property was acquired the current occupancy was at 97 percent. The seller was WGI 2665 North First LLC, a joint venture with a local operator and overseas equity. This entity had invested over $2 million on common area renovations in the past year, which included the full-height glass lobby.
The listing agents on the sale were Donald Lonsinger, First Vice President, and Mark Christierson, Senior Vice President, at CBRE. The real estate services company declined to comment when contacted for the story.
Seagate will be making some improvements to the property. This will include a new HVAC system, a fitness center, showers and bike storage. “We believe that these kinds of amenities are what many of the technology tenants in the area looking for their employees on a long term basis,” said Polite.
This property also has a benefit of being across the street from a light rail stop with the Valley Transportation Authority at Bonaventura Station number one. “This gives employees of tenants in the building the ability to access mass transit in either a north or south direction. This is an important feature for many companies in the area,” said Polite.
New York Life acquired the property in North San Jose for its commingled fund, the McMorgan Northern California Value-Add/Development Fund. This investment entity buys a combination of existing assets with a value-add theme or invests equity in new development projects. Some of its recent deals have included office and industrial transactions.
Photography courtesy of CBRE