Midwest Buyer Acquires Milpitas Office Campus, Bucking the Trend in the Bay Area Office Market

Blue Owl Capital purchases a 580,400 square foot office campus in Milpitas, providing a glimmer of hope in a struggling Bay Area office sector.

Introduction: In a surprising turn of events for the Bay Area office market, a Midwest buyer has acquired a sprawling office campus in Milpitas, offering a glimmer of hope amidst the region's economic challenges. The five-building research and office campus, totaling 580,400 square feet, was purchased by Chicago-based Blue Owl Capital for slightly under $192.5 million. This acquisition stands as a testament to the pockets of strength that can still be found in the wobbly Bay Area office sector. Body:

A Contradiction in a Struggling Market

Despite the worsening conditions in the Bay Area office market, with skyrocketing vacancies and all-time highs in South Bay, downtown San Jose, and San Francisco, the purchase of the Milpitas office campus provides a welcome contradiction to the economic maladies caused by the COVID-19 pandemic. Tech companies have been slashing their office space requirements, leading to a significant downturn in the market. However, this acquisition signals that there are still opportunities for growth and investment in the region.

A Sale-Leaseback Transaction

The purchase of the Milpitas office campus by Blue Owl Capital follows a sale-leaseback arrangement. Western Digital, the previous owner and occupant of the campus, immediately leased the property from Blue Owl upon completion of the sale. The lease term began this month and is set to extend to January 2039, providing Western Digital with a site it can occupy for over 15 years. This type of transaction allows the seller to raise cash while maintaining access to the property for their operations.

Blue Owl Capital's Expertise

Blue Owl Capital specializes in sale-leaseback transactions, offering companies the opportunity to raise capital while retaining the use of their desired properties. Corporations, facing higher interest rates and limited access to cheap debt financing, can benefit from this type of arrangement. Blue Owl Capital's portfolio includes partner tenants such as 7-11, Bally, Big Lots!, Chubb, Dollar General, NAPA Auto Parts, State Farm, Walgreens, Wells Fargo, and Whirlpool, showcasing the company's expertise in managing real estate assets.

A Strong Growth Trajectory

As of June 2023, Blue Owl Capital had reached an impressive milestone of $150 billion in real estate assets under management. Despite tumultuous markets, interest rate fluctuations, and uncertain economic growth, the company has achieved stable and strong growth. This acquisition of the Milpitas office campus further solidifies Blue Owl Capital's position as a key player in the real estate market. Conclusion: The acquisition of the Milpitas office campus by Blue Owl Capital offers a glimmer of hope in the struggling Bay Area office market. While vacancies and challenges persist, this transaction demonstrates that there are still opportunities for growth and investment in the region. The sale-leaseback arrangement provides Western Digital with a long-term site for their operations, while Blue Owl Capital continues to expand its impressive portfolio. As the Bay Area navigates the post-coronavirus world, this acquisition serves as a reminder that resilience and strategic investments can pave the way for a brighter future in the office sector.