Investors grab big San Jose office building for $82 million
SAN JOSE — A big office building in a prime north San Jose location has changed hands — for the third time in two years.
A group operating under the name LL 2851 Junction LLC paid $82 million for the 156,000-square-foot, four-story building at 2851 Junction Ave. in San Jose. The seller in the May 8 transaction was BRE Junction Property Owner, an affiliate of Blackstone Group.
The seller had bought the property just six months ago.
Does the sale portend a leasing and investment boom in north San Jose, where the office market has had its ups and downs? Or does it signal a top to the area’s market, foreshadowing a cooling commercial real estate sector?
“We are hovering around the top of the market when you see quick transactions like this, properties selling six months later,” said Chad Leiker, a first vice president with Kidder Mathews, a commercial realty brokerage. “Some of the local players may be getting out of the market.”
Other experts believe north San Jose could still have considerable upside for leasing and sales activity.
“North San Jose has certainly gone through mood swings; it’s had some ups and downs,” said John Yandle, executive vice president with the Santa Clara office of commercial realty brokerage Newmark Cornish & Carey.
But Yandle points to the decision by Cupertino-based Apple to create the foundation for a big campus in north San Jose along U.S. 101 where several thousand people could work, along with Samsung’s campus of office towers on North First Street.
“We’ve been waiting a long time for the world to come to north San Jose, and we’re finally starting to see that with the Apple campus,” Yandle said.
“You have all the activity in the Orchard Parkway area, which is known as renovation row,” he said, referring to the numerous face lifts and rehabs of older office buildings in that part of town. Verizon was a high-profile tenant that leased offices in that neighborhood.
At the very least, the recent purchase of the 2851 Junction Ave. office building shows a quick $6 million price increase for the building.
In November 2016, only six months ago, Blackstone paid $76 million to buy the building from an affiliate controlled by Hines Interests, a realty investment firm.
And two years ago, in May 2015, Hines had paid $86 million to buy the same building from a venture headed by TMG Partners and Alcion Ventures.
The 2851 Junction Ave. building is fully leased to TSMC Technology, a unit of Asian semiconductor titan Taiwan Semiconductor Manufacturing Co. That suggests the new owners see the building as an investment rather than offices that need new tenants.
Los Angeles-based portfolio manager Brett Lipman was listed as the authorized agent for the entity that now owns the building, according to Santa Clara County property records. Lipman didn’t respond to multiple requests for a comment about the purchase.
“There’s been a general softening of the market, but depending on what Apple does in north San Jose, this could wind up being a good purchase in five years,” Yandle said.