Silicon Valley Business Journal

San Jose — Apr 16, 2013

Ridge Capital Investors liked North San Jose so much, it came back for seconds.

The San Francisco-based investment firm joined forces with Contrarian Capital Management to purchase 3001 Orchard Parkway for $13.5 million. The 97,840-square-foot office/R&D building was most recently home to Fairchild Semiconductor, which moved out two years ago. A joint venture of Lane Partners and JER Partners was the seller.

It’s the second office deal in Silicon Valley for Ridge Capital, which also invests in multifamily properties. Last October, Ridge Capital and Marin County-based W3 Partners purchased a three-building campus at 51, 77 and 145 Rio Robles Drive for $34 million. Extreme Networks leased 145 Rio Robles in January, bringing the North San Jose campus to 100-percent occupancy. (SunPower Corp. is in the other two buildings.)

“We feel it’s a good time to be investing in the Valley,” said Trevor Wilson, managing director of Ridge Capital. “The real play we’re making is this is a 98,000-square-foot building that’s really catered to a single tenant. There aren’t that many 100,000-square-foot contiguous spaces available in the market right now.”

Contrarian Capital Management LLC specializes in investing in distressed assets and manages about $3.1 billion in assets. This is the first deal for Ridge with Contrarian. The venture is planning to invest several million dollars into upgrading the 1980s-era property to attract a tenant. San Jose-based Modulus is working on a design, which is likely to include a new curtain wall, outdoor amenities and glazing. Joe Kelly and Jeff Houston of CBRE are representing the property.

The older-office-rehab investment play is growing in popularity, and will get a big boost as MWest, the new owners of the former Mission West Properties Inc. portfolio, is expected to pump big bucks into legacy office/R&D space.

Wilson allows that the North San Jose submarket is competitive but said the fundamentals — tenants searching for space and strong job growth — remains strong.

“There’s a lot of money being spent in that immediate area and the valley as a whole,” he said. “The good news is there’s quite a bit of demand.”

Vacancy in the North San Jose submarket tightened in the first quarter to 15.2 percent, down from 17 percent a year ago, according to Cassidy Turley.

“We are going to continue to seek interesting value-added investment opportunities in the Bay Area,” he said. “We look for investments that range from $10 million to $50 million, where we can deploy a physical and management repositioning.”

Andy Zighelboim of Colliers International represented the seller, Lane Partners and JER. The buyers represented themselves.