The recent purchase of a vast office campus in Milpitas, South Bay, by Blue Owl Capital indicates signs of resilience in the Bay Area’s challenged office sector.
The Midwest-based buyer shelled out just below $192.5 million for the site, home of data storage producer Western Digital.
This company made headlines when the US Securities and Exchange Commission documented its acquisition of SanDisk in 2015. They divested the Milpitas campus via their subsidiary, Sandbox Expansion.
Upon securing the five-building research and office space, which spans 580,400 square feet, Blue Owl promptly rented the venue back to Western Digital.
The lease started this month and is projected to run through to January 2039, with options for numerous renewals.
Such sale-leaseback deals are a staple for Blue Owl Capital, a niche asset management enterprise with expertise in direct lending, GP capital solutions, and property investments. These agreements enable vendors to tap into funds while continuing their on-site activities.
Reuters has stated that the company currently boasts about $138.2 billion of assets.
Blue Owl’s website reveals the increasing demand for such deals. It cites reasons like corporations’ inability to tap into once accessible low-cost debt financing and their struggle with “significantly escalated interest rates.”
The transaction in Milpitas underscores Blue Owl’s appetite for lasting property ventures. Their purchasing strategy zeroes in on estates with triple net leases home to investment-grade or financially robust tenants.
For Western Digital, this agreement ensures a reliable base for over a decade while presenting the purchaser with a dependable, long-term investment.
Notably, Blue Owl’s partner tenants comprise leading brands such as 7-11, Bally, Big Lots!, Chubb, Dollar General, NAPA Auto Parts, State Farm, Walgreens, Wells Fargo, and Whirlpool, as highlighted on their website.
By June, Blue Owl Capital had amassed an impressive $150 billion in property assets under management. In their quarterly financial summary, the firm’s leaders conveyed confidence, celebrating “consistent and robust expansion amid volatile markets, notable shifts in interest rates, and varying projections surrounding inflation and economic progression.”