Cannae and Blue Vista defy market, sell San Jose office at a profit

While office landlords bleed money from the sale of workplace properties, Cannae Partners and Blue Vista Capital Management went straight to the bank.

An affiliate of the San Francisco- and Chicago-based investors sold a 146,200-square-foot office building at 3011 North First Street in San Jose for $63.6 million — or $14 million more than they paid three years ago, the San Jose Mercury News reported.

The buyer of the single-story building was Klein Investments Family Limited Partnership, based in Newport Beach. The deal works out to $435 per square foot.

Cannae and Blue Vista purchased the site from Sand Hill Property in 2021 for $49.63 million, or $339 per square foot.

The deal marks a rarity in office deals across the Bay Area and the U.S., where office values have slumped because of high vacancy following a shift to remote work, soaring borrowing costs, rising building defaults and diminishing rents. 

Office values have fallen by two-thirds or more across the Bay Area, while vacancy has climbed to as high as 37 percent in San Francisco and 27.5 percent in Silicon Valley, according to Savills.

Klein paid 28.2 percent more for the property than it traded for in 2021. The family office also paid 20.7 percent more than its assessed value early this year of $52.7 million.

At the time of purchase, the building was fully leased. In March, Cannae and Blue Vista  secured a long-term lease renewal with the building’s only tenant, Intermolecular, a unit of Germany-based Merck KGaA.

The firm has been based for more than a decade at the address in San Jose’s “Renovation Row,” where it provides equipment and services to accelerate R&D for semiconductor and clean-energy companies, according to the Silicon Valley Business Journal.

Sand Hill Property, based in Palo Alto, had purchased the 9-acre property in 2015 for $31 million, or $212 per square foot.

Sand Hill had looked at redeveloping the site into an urban village with 505,000 square feet of offices, 800 homes and 13,000 square feet of shops and restaurants, but the firm never filed a formal proposal with the city.

The Klein Investments Family Limited Partnership was founded in 1996 by William and Carolyn Klein, according to state business records. 

— Dana Bartholomew

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