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KKR-Backed Office Investor Unloads San Jose Campus For $55.5M

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In June, Drawbridge Realty secured plenty of buying power through $240M in equity commitments led by global investment firm KKR.

This week, chalk up another $55.5M from 5300-5350 Hellyer Ave., a two-building, 160K SF office campus Drawbridge has sold to an affiliate of private equity firm Empire Square Group.

San Jose Drawbridge Sale
5300-5350 Hellyer Ave. in San Jose

The campus has served as Cobham Advanced Electronic Solutions' corporate HQ for most of the decade and represents exactly the type of strategy in which Drawbridge specializes, Vice President of Investments Bill Doyle said.

Drawbridge acquired the campus for $37.5M in 2015 from a partnership controlled by developer Carl Berg. It was soon negotiating a lease renewal for Cobham and providing it with a substantial tenant improvement allowance.

"Our mantra is to buy shorter-term lease assets, mission-critical facilities with high renewal probabilities, and see what we can do to extend the lease during our hold," Doyle told Bisnow

Hellyer Avenue and the rest of South San Jose are about 10 miles from the downtown flurry of construction and investment, but the submarket offers its advantages. In Q2, Class-A office space in the area commanded an average annual asking rent of $35.16, much less than the Silicon Valley average of $59.64, according to Cushman & Wakefield. It is also closer to more affordable housing options for employees, Doyle points out.  

Although Drawbridge operates nationally, it is still bullish on San Jose. In July, it used its new funding to acquire Rose Orchard office campus, a fully leased, 315K SF property, from Shorenstein Properties for $128.2M. Doyle said he hopes Drawbridge will use the proceeds from Hellyer Avenue for a property "a little more accretive to [their] portfolio" and "ideally in Silicon Valley."

After this week's disposition, brokered by CBRE's Scott Prosser, Joe Moriarty and Jack DePuy, the company has even more capital to do so. 

"I'm kind of sad to see it go because it is a great asset and Cobham is a great tenant," Doyle said. "But now we can go out and do some other stuff with the money and hopefully repeat the same story over and over again."