ACG Equity Partners Agrees to Pay $775M for San Jose Office

1143 Coleman Ave. (Building 1)

AGC Equity Partners, a UK-based asset management firm, has agreed to buy a three-building office development in San Jose for $775 million, Green Street reported last week. The property is located within Coleman Highline, a 1.7 million-square-foot project under development by a partnership of Sansome Partners and Hunter Properties.

The property sold by the partnership is under construction and will total 658,000 square feet once fully completed. The sale is expected to close after the office buildings come online, in December of this year. Eastdil Secured negotiated the transaction on behalf of the seller.

Last year, the developers secured a $155 million loan package for the project’s second phase, originated by Goldman Sachs and Deutsche Bank. The first two buildings, comprising 357,106 square feet, were completed in 2017. Buildings 3 and 4 were constructed in 2020 and they total 358,594 square feet. These four buildings are occupied by streaming company Roku, which agreed to lease an initial 380,951 square feet, then expanded its footprint at Coleman Highline to 715,168 square feet, according to CommercialEdge.

The buildings acquired by AGC will be occupied by Verizon, according to the same Green Street article. When it opens, the office campus will house approximately 3,400 employees from the company’s media unit. Buildings 7 and 8, currently under construction, will total 388,800 square feet of office space. The developer benefits from a $350 million construction loan for these buildings, funded by Wells Fargo Bank in 2019, according to CommercialEdge.

The Coleman Highline development is situated on Coleman Avenue in North San Jose, adjacent to Norman Y. Mineta San Jose International Airport. Tenants will be able to access nearby transport via major thoroughfares—including Interstate 880 and State Routes 101 and 87—as well as a Caltrain station, all within a 1-mile radius.

Coleman Highline development plans call for 53,000 square feet of amenities space, a 175-room hotel, 1,600 residential units, about 7,500 square feet of retail and more than 4,800 parking spaces. The office component is slated to total more than 1.5 million square feet, including buildings five and six, which have yet to break ground.

Tech-driven record prices

1173 Coleman Ave. (Building 3)

At almost $1,178 per square foot, the transaction would exceed the price per square foot recorded in year-to-date sales through August ($584) by almost 102 percent, according to CommercialEdge data. It would also be the largest single-property transaction in the Bay Area (including the East and South Bay) market, among those recorded so far this year.

Last year, the first two buildings at Coleman Highline were purchased by Blackstone for $275 million, CommercialEdge data shows.

Some of the largest transactions that occurred this year in San Jose were office buildings leased to technology companies. In August, KKR acquired HQ @ First for $535 million, a 603,666-square-foot campus leased to Micron Technologies.

The San Jose North office submarket reached a vacancy of 22.1 percent by the end of August, according to CommercialEdge. Despite vacancy not budging by a lot in similar submarkets in the past two months, sales continue to thrive, especially among stabilized or preleased properties and new developments aimed at life science and technology tenants.