May 28, 2024
A huge South Bay office campus occupied by a top-notch tech firm has been bought by a Midwest buyer.

MILPITAS — A huge South Bay office campus occupied by a top-notch tech firm has been bought by a Midwest buyer in a deal that points to pockets of strength in a wobbly Bay Area office sector.

The five-building research and office campus in Milpitas was purchased for slightly under $192.5 million, according to documents filed on Sept. 9 with the Santa Clara County Recorder’s Office.

The campus is bounded by Sandisk Drive, Murphy Ranch Road, Technology Drive and McCarthy Boulevard, public records on file with the County Assessor’s Office show.

A tech campus consisting of five office and research buildings on Sandisk Drive in Milpitas. (Google Maps)

Chicago-based Blue Owl Capital bought the vast campus, which totals 580,400 square feet, according to the county real estate documents.

Western Digital, a manufacturer of computer drives and data storage systems, acting through an affiliate called Sandbox Expansion, sold the tech campus. Western Digital also occupies the five-building site.

The transaction occurred at a time of wide-ranging — and worsening — woes for the Bay Area office market.

Office vacancies have skyrocketed and reached all-time highs in the South Bay, downtown San Jose and San Francisco as tech companies slash the space they need.

As a result, the Milpitas deal offers a welcome counterpoint to the economic maladies that still afflict the Bay Area’s feeble office market in a post-coronavirus world.

As part of the deal, Western Digital immediately leased the campus from the new owner, Blue Owl, upon completion of the sale.

The lease term began this month and is slated to extend to January 2039, more than 15 years, the county records show. Multiple extensions are possible in the lease agreement, according to the public filing.

This sort of arrangement, known as a sale-leaseback, is one type of transaction in which Blue Owl Capital specializes.

A sale-leaseback provides a way for a seller to raise cash and at the same time maintain access to a site where the company wishes to operate.

“Corporations can no longer access the cheap debt financing that had been available to them for years,” Blue Owl Capital states in a post on its website. “Companies are facing substantially higher interest rates.”

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The Milpitas property purchase and lease agreement accordingly gives Western Digital a site it can occupy for well over a decade and a half, and perhaps longer.

7-11, Bally, Big Lots!, Chubb, Dollar General, NAPA Auto Parts, State Farm, Walgreens, Wells Fargo and Whirlpool are companies that Blue Owl lists as “partner tenants,” according to a post on the company’s website.

At the end of June 2023, Blue Owl Capital had reached $150 billion in real estate assets under management, the company stated in its quarterly financial report covering the April-through-June quarter.

“We have achieved stable and strong growth through a period of tumultuous markets, substantial moves in interest rates, and fluctuating expectations around inflation and economic growth,” Blue Owl Capital executives stated in a prepared release.

 

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