Yahoo-leased campus in San Jose selling for $775M

UPDATED, 4:13 p.m., Sept. 24: AGC Equity Partners has agreed to buy a Yahoo-leased campus in San Jose for $775 million, The Real Deal confirmed. It represents a record-breaking price for a single office property in the city.

The two-building complex includes a 603,363-square-foot Class A office building at 1199 Coleman Avenue and a 54,571-square-foot amenity building located next door.

London-based AGC will pay about $1,177 a square foot to acquire both structures, two sources said. That’s also a high-water mark on a price per square foot basis for a San Jose office sale of at least $100 million. It tops the current record by 33 percent, according to Green Street, which first reported the deal.

It’s unclear whether the transaction has officially closed; one source with knowledge of the deal said it had, while another said it was still pending. As of Thursday, the sale had not been recorded in the Santa Clara County Clerk-Recorder’s Office. A representative of AGC did not respond to a LinkedIn message seeking comment.

The previous record for an office property sale was $535 million, set in July by an affiliate of investment firm KKR, when it acquired the HQ @ First campus. The three-building, 603,666-square-foot office campus traded for about $886 a foot; it houses Micron Technology’s West Coast hub and Zscaler’s world headquarters.

Yahoo announced in 2019 — when it was named Verizon Media — that it would lease to purchase both Coleman Avenue structures, which would serve as its new innovation hub in Silicon Valley upon completion. Yahoo agreed to lease the campus for 15 and a half years, according to a copy of the property’s offering memorandum created by Eastdil Secured. Eastdil is advising the campus’ seller, a partnership of Hunter Properties and Sansome Partners.

Yahoo’s lease term is slated to begin Dec. 1 and run until May 31, 2037, with the company paying $4.10 a square foot a month on a triple-net basis at the start, the memorandum said. Its lease stipulates 3 percent annual bumps, six months of free rent, and a $100-per-square-foot tenant improvement allowance, the memorandum said.

The Yahoo campus is part of the larger Coleman Highline project, which will feature six Class A office buildings, four amenity buildings, a hotel and retail space once fully built out, the memorandum said.

Hunter Properties affiliate Hunter Storm is overseeing Coleman Highline’s development, with investment firm Sansome acting as a capital partner in the venture. The 1.8-million-square-foot project is next to PayPal Park, where the San Jose Earthquakes pro soccer team plays its home games, and is also about two miles from Mineta San Jose International Airport.

The two buildings AGC has agreed to buy are dubbed “Coleman Highline Phase IV.” The Highline’s first and second phases comprise six completed office and amenity buildings, five of which are leased to Roku. The digital media company rents about 738,000 square feet within the entire project, according to the memorandum.

The development’s third phase, a 288,000-square-foot office structure, has not broken ground yet, while the Yahoo-leased fourth phase is expected to wrap up by the end of this year, the memorandum said.

Hunter Properties declined to comment, while representatives of Sansome and Eastdil did not respond to requests for comment.

San Jose’s office sales market has remained strong despite the pandemic and the work-from-home shift. Some of the notable deals that have closed over the past 12 months include Shorenstein’s purchase of two Class A office buildings in North San Jose for $235 million last month, or about $549 a square foot; and Blackstone Group’s purchase of a pair of Roku-leased offices within Coleman Highline for $275 million, or about $770 a square foot, last November.

“Confidence remains high for fully leased amenity-rich product in San Jose,” said Lena Tutko, research director for Colliers covering the Silicon Valley and San Francisco Peninsula markets. “This accelerated flight to quality, from both domestic and international capital, is driving San Jose office pricing to unprecedented levels.”

This story has been updated to include comments from Colliers’ Lena Tutko.