Huge South Bay office campus occupied by high-profile tech firm lands buyer

$190 million-plus deal hints at pockets of strength in Silicon Valley office market

MILPITAS, CA — A massive South Bay office campus occupied by a high-profile tech firm has been purchased by a Midwest buyer, pointing to pockets of strength in a shaky Bay Area office sector.

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

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

According to county real estate documents, Blue Owl Capital of Chicago purchased the vast campus, which totals 580,400 square feet.

Western Digital, a manufacturer of computer drives and data storage systems, sold the tech campus through an affiliate called Sandbox Expansion. The five-building complex is also home to Western Digital.

The transaction took place during a period of widespread – and worsening – woes for the Bay Area office market.

As tech companies reduce their space requirements, office vacancies have skyrocketed to all-time highs in the South Bay, downtown San Jose, and San Francisco.

The Milpitas transaction provides a welcome diversion from the economic ills that continue to plague the Bay Area’s feeble office market in the post-pandemic era.

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

According to county records, the lease term began this month and is set to last until January 2039, a period of more than 15 years. According to the public filing, the lease agreement allows for multiple extensions.

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

A sale-leaseback allows a seller to raise cash while maintaining 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,” writes Blue Owl Capital in a blog post. “Companies are facing substantially higher interest rates.”

The Milpitas property purchase and lease agreement provides Western Digital with a location that it can occupy for at least the next decade and a half, if not longer.

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

Blue Owl Capital will have $150 billion in real estate assets under management by the end of June 2023, according to the company’s quarterly financial report for the April-through-June quarter.

“We have achieved stable and strong growth despite tumultuous markets, significant moves in interest rates, and fluctuating expectations around inflation and economic growth,” Blue Owl Capital executives said in a prepared statement.

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