A family investment group based in Newport Beach has paid $81.5 million for a R&D and office property in Silicon Valley, marking one of the largest reported commercial real estate deals this year in California involving an Orange County-based buyer.
Klein Family Investments LP recently closed on the purchase of 146,000-square-foot property in San Jose that serves as the West Coast Innovation Center for German multinational science and technology company Merck KGaA, which has a valuation topping $80 billion.
The property, located about 2.5 miles from San Jose’s airport and some five miles from the city’s downtown, traded hands for about $558 per square foot.
The buyers took out a $50 million loan from Northern Trust Co. to fund the deal, according to local reports, which noted the deal is among the few large office sales in the Bay Area region of late to trade hands for more than what the sellers paid for it.
The building, which holds a mix of flex, R&D, lab and office space, previously sold for nearly $50 million in 2021, according to local reports.
Long-Term Tenant
The building’s tenant and high-tech facilities were the factors behind the appreciation in the office’s value.
Merck affiliate Intermolecular, a firm focused on advanced materials innovation, has used the building as its base for over a decade and earlier this year Merck signed a long-term lease extension for the entire property.
The building “supports both the existing and future scopes for [Merck KGaA], with direct connections to resources, market access, extensive expertise as well as countless technological opportunities through local relationships and partnerships,” a statement said.
The San Jose property, built in 1980, features a variety of clean room facilities and other lab- and research-related infrastructure, in addition to power generators that far exceed the norm for buildings of its type in Silicon Valley, making the facility “nearly impossible to recreate,” officials that worked on the deal said.
The building’s replacement cost tops $200 million, according to brokerage information from the Irvine office of Colliers, whose Senior Executive Vice President Michael Hartel and Senior Vice President Nick Velasquez represented the buyers in the deal.
The sellers, a venture between Cannae Partners and Blue Vista Capital Management LLC, were represented by Newmark’s Steven Golubchik, Edmund Najera, Jonathan Schaefler and Darren Hollak.
Bay Area 1st
The purchase marks the first Bay Area property for the Klein family, whose Bill Klein was an engineer by trade serving as an executive for several technology firms, including Tustin-based computer services firm Cerplex Group in the 1990s.
Klein would later turn his attention to commercial real estate, running the family business with wife Carolyn Klein, a real estate attorney.
The duo are “opportunistic buyers,” with an eye on buildings that count heavy amount of infrastructure investments, according to Colliers’ Hartel, who has worked with the family on several acquisitions.
The family last made real estate headlines near the start of 2020, when they paid $44 million for the Anaheim headquarters of teen and young adult fashion retailer Pacific Sunwear of California Inc.
PacSun’s lease at the 181,000-square-foot building along Miraloma Avenue is said to run another nine years.
A year before the PacSun deal, the family paid a reported $41 million for a 155,000-square-foot-office along E. La Palma Avenue in Anaheim.
The Business Journal earlier this year was first to report on another notable OC apparel brand St. John Knits, inking a deal to move its headquarters to the La Palma building.
Along with OC, the family also has investments in San Diego.
The Kleins are also locally known for their support of OC’s arts scene; Bill and Carolyn Klein have been honorary directors for several productions at South Coast Repertory.
