The recent purchase of a large office campus in Milpitas, South Bay, by Blue Owl Capital, signals pockets of strength in the Bay Area's troubled office sector. According to an article from the Mercury News, the Midwest buyer paid slightly under $192.5 million for the site, occupied by data storage manufacturer Western Digital. The company, whose acquisition of SanDisk was reported by the US Securities and Exchange Commission in 2015, sold the Milpitas campus through its affiliate, Sandbox Expansion.

After acquiring the five-building research and office campus totaling 580,400 square feet, Blue Owl immediately leased the site back to Western Digital. As reported in the Mercury News, the lease commenced this month and is expected to last until January 2039, with the possibility of multiple extensions.

This sale-leaseback agreement is typical for Blue Owl Capital, an alternative asset management firm specializing in direct lending, GP capital solutions, and real estate. Such arrangements allow sellers to access capital while maintaining on-site operations. According to Reuters, the firm had around $138.2 billion of assets under management as of today. Blue Owl’s website highlights a growing need for these transactions, since “corporations can no longer access the cheap debt financing that had been available to them for years” and must contend with "substantially higher interest rates."

The Milpitas deal underlines Blue Owl’s penchant for long-term real estate investments. Its acquisitions focus on properties with triple net leases occupied by investment grade or creditworthy tenants. The deal provides Western Digital a secure location for the next decade-and-a-half while giving the buyer a stable, long-term asset. Blue Owl's partner tenants include prominent companies like 7-11, Bally, Big Lots!, Chubb, Dollar General, NAPA Auto Parts, State Farm, Walgreens, Wells Fargo, and Whirlpool, as noted on their website.

As of June, Blue Owl Capital had reached a whopping $150 billion in real estate assets under management. The company’s executives expressed optimism in their quarterly financial report, heralding "stable and strong growth through a period of tumultuous markets, substantial moves in interest rates, and fluctuating expectations around inflation and economic growth."