Lone Star Funds, TMG Partners and Grove Real Estate Partners Acquire $650 Million Silicon Valley Office Portfolio From Washington Holdings

SAN JOSE — A buying group led by London-based Lone Star Funds has acquired six tech campuses across Silicon Valley for approximately $650 million, according to grant deeds filed in Santa Clara County in September. The portfolio, sold by Seattle-based Washington Holdings, totals 2.2 million square feet across 50 buildings and 140 acres, with Bay Area firms TMG Partners and Grove Real Estate Partners serving as operating partners for the new ownership group.

The transaction was recorded at a significant discount to the properties' previously stated combined value of $1.16 billion, as reflected in separate grant deeds for each campus. At the reported purchase price, the deal implies a blended cost of approximately $295 per square foot across the six campuses. The portfolio was 87% leased at closing, with 63 tenants and a weighted average lease term of approximately 3.3 years.

A Large-Scale Bet on Silicon Valley's Golden Triangle

The six campuses are located within Silicon Valley's Golden Triangle, an area roughly bounded by U.S. Highway 101, State Route 237 and Interstate 880, spanning the cities of San Jose, Milpitas and Santa Clara. Jerome Foulon, global head of commercial real estate with Lone Star Funds, said the firm sees the acquisition as well-positioned relative to current market conditions.

"We see significant opportunity in this portfolio given the strong tailwinds across the business landscape right now in Silicon Valley," Foulon said.

Ben Kochalski, co-chief executive officer with TMG Partners, described the transaction as an uncommon chance to assemble a concentrated position in the region's research and development market.

"This acquisition represents a rare opportunity to secure the most cohesive assemblage of mission-critical R&D space in Silicon Valley in a single transaction," Kochalski said.

David Sandlin, an executive vice president with Colliers, offered an independent assessment of the deal's market significance. "This is really positive for Silicon Valley," Sandlin said. "All the indications are that the market is going to get stronger." He added that the acquired properties are "quality, functional buildings" whose new owners "are likely going to reap a lot of benefits from that portfolio."

Washington Holdings invested approximately $173 million — roughly $87 per square foot — in base-building, exterior and interior upgrades across the portfolio during its ownership period.

Campus-by-Campus Breakdown

The six campuses span a range of sizes and configurations, with prior deed valuations reflecting pre-correction market values.

Montague Oaks, located at 627–655 River Oaks Parkway in North San Jose, is an eight-building campus totaling 295,000 square feet on 18.6 acres. The property carried a prior deed value of $300 million. Built in the early 1980s, the campus includes a Verizon (MCI Metro) telecom switch facility atop a critical fiber intersection, a feature the ownership group has highlighted as part of the portfolio's mission-critical infrastructure profile.

North First @ Orchard Station, a six-building campus near the Orchard light-rail station in North San Jose, totals 266,800 square feet on 17 acres. Its addresses include 41 Daggett Drive. The campus carried a prior deed value of $210 million and was approximately 96% leased at the time of the transaction.

Mission Park, a 12-building complex in Santa Clara, had a prior value of $195 million. The 33-acre office and research park totals 500,300 square feet and includes a 73,000-square-foot data center, a retail hub and a 175-room hotel.

Montague Square, a six-building campus at the corner of Montague Expressway and North First Street in North San Jose, totals 251,200 square feet on 15 acres. Its prior deed value was $186 million.

Tasman Tech Center in Milpitas is the largest single asset in the portfolio, comprising 14 buildings and 736,800 square feet on 47 acres. Addresses include 1450 McCarthy Boulevard, 540 Alder Drive and 700 Tasman Drive. The campus carried a prior value of $176 million.

Zanker Place, a four-building office center at 1920 Zanker Road in North San Jose, totals 142,000 square feet and had a prior deed value of $96 million. The Google Brokaw campus and the PayPal headquarters are located nearby.

Market Context

The transaction reflects a broader dynamic in Silicon Valley's office and research-and-development market, where institutional buyers have been acquiring heavily upgraded, income-producing assets at steep discounts to pre-correction valuations. The portfolio's blended price of approximately $295 per square foot compares to the previously recorded aggregate deed value of $1.16 billion — a discount of roughly 44% to those prior figures.

The campuses are predominantly single-story R&D and office buildings, a building type that has historically served semiconductor, telecom and technology tenants in the South Bay. The portfolio's 87% occupancy rate at closing provides an existing income base while leaving room for additional leasing activity.

Lone Star Funds structured the acquisition through its Lone Star Real Estate Fund VII vehicle, with TMG Partners and Grove Real Estate Partners taking on day-to-day operational responsibilities for the portfolio.

About the Parties

Lone Star Funds is a London-based private equity firm focused on investments in real estate and financial assets. TMG Partners is a Bay Area-based commercial real estate firm with a focus on the Northern California market. Grove Real Estate Partners is also Bay Area-based and serves as a co-operating partner on the portfolio. Washington Holdings, the seller, is a Seattle-based real estate owner that had assembled and upgraded the Silicon Valley R&D platform over its hold period.

Sources

• TMG Partners — Investors place big real estate bet on Silicon Valley's future