In a rare transaction, not often seen around the Bay Area, the region’s stalwart developer and property owner, the Sobrato Organization, has let go of a five-building, nearly 433,522 square foot Valley Oak Technology Center on the southern boundary of San Jose. The Sobrato family, which had owned the property through its Sobrato Foundation, sold the complex to an entity associated with Beverly Hills, CA-based Kennedy Wilson for $81.2 million, or roughly $187 per square foot.
The sale was first reported by the San Jose Mercury News.
The five buildings are located at 6373 San Ignacio Ave., 6375 San Ignacio Ave., 6377 San Ignacio Ave., 6379 San Ignacio Ave. and 6480 Via Del Oro and are situation in San Jose’s southernmost commercial neighborhood, close to the intersection of State Route 85 and U.S. Highway 101. The majority of the campus was developed in the early 2000s, and today four of the five the buildings are occupied. The development, while in proximity to transportation (the VTA Santa Teresa station is just about a block away), amenities (Santa Teresa Village is in very close proximity to the campus) and highways, it may seem somewhat isolated and in a submarket that has perhaps the highest vacancy in Silicon Valley.
As a submarket of Silicon Valley, the city of San Jose, which also covers the largest geography, has the second highest vacancy rate, pegged around 16.5 percent, according to a recent, second quarter of 2018 Silicon Valley Research & Forecast Report by Colliers International. It trails the city of Santa Clara, which sits around 18.8 percent. However, the southern portion of San Jose has had a difficult time keeping up with the leasing demand that the rest of the region has experienced.
This does offer a discount for companies seeking to be in Silicon Valley but willing to be slightly away from the downtown core. Also, the project does offer some benefits in terms of a reverse commute, which it advertised in its flyers in the past.
“This is an excellent opportunity for Kennedy Wilson,” said Scott Prosser, Executive President at CBRE, who worked on brokering the sale on behalf of the seller. “With 81 percent of the project leased to three credit tenants, the property offers immediate cash flow with future upside on leasing the last vacant building.”
The Valley Oak Technology campus is around 440,000 square feet and the buildings that are occupied are home to Extreme Networks, Jabil and Northrop Grumman.
The Sobrato Family Foundation was represented by CBRE’s Scott Prosser, Joe Moriarty, Jack DePuy and Russell Ingrum. Brad Zampa, Mike Walker and Megan Woodring of CBRE’s San Francisco office organized the seven-year, non-recourse, full-term interest only, floating-rate acquisition financing at a competitive spread priced over 30-day LIBOR, provided by a national financial service provider. The financing was for $52.8 million, according to CBRE.