SAN JOSE—Demand in South San Jose tends toward sub-50,000-square-foot tenants seeking quality space at less than half the price of North San Jose. Hellyer Oaks Technology Park presented an opportunity to reposition a campus that has historically catered to large blocks users into a multi-tenant format.
Vertical Ventures raised $10 million in crowdfunded equity capital from 170 high-net worth investors to help acquire the property last month. Hamid Rezapour, founder of Vertical Ventures, and Ian Formigle, vice president of investments for CrowdStreet, recently discussed the asset with GlobeSt.com in this exclusive.
Globe.St.com: What attracted you to the Hellyer Oaks Technology Park transaction and how did Vertical Ventures and CrowdStreet connect?
Hamid Rezapour: Hellyer Oaks Technology Park is a 346,000-square-foot, two-building office campus. The project has a great location near 101 in South San Jose with good parking and good access to transit. It's also proximate to a lot of new housing and retail amenities, which tenants really appreciate. The property's location also benefits greatly from a reverse commute traffic pattern. With Hellyer Oaks, we saw a fantastic opportunity to reposition a campus that has historically catered to large blocks users into a multi-tenant format, which is the type of demand we are seeing in South San Jose. Rents in South San Jose are much cheaper than North San Jose, so if you can offer sub-50,000-square-foot tenants quality space at less than half the price of North San Jose comps and in a location with a reverse commute, you will attract them. Once they come to this submarket, they tend to stay.
Vertical Ventures typically joint ventures with institutional equity partners on our portfolio acquisitions. On Hellyer Oaks, we felt it was time to explore crowdfunding instead of our traditional route. We reached out to a few groups and found the right fit with CrowdStreet.
Ian Formigle: CrowdStreet is always on the lookout for sponsors with a proven track record in their chosen geography and asset class. For starters, as a Bay Area-based operator that specializes in Bay Area value-add office deals including San Jose, Vertical Ventures brought immediate credibility as a strong sponsor. Second, the deal had a logical business plan that already had proof of validation. It's rare to find a 346,000-square-foot office deal in San Jose that's had 32,000 square feet of leasing traction while under contract and in the exact multi-tenant format that the sponsor is targeting. That part of the story was compelling.
CrowdStreet also saw opportunity in Hellyer Oaks as we could understand why it might be overlooked by institutional investors while, at the same time, could make sense to individual investors. We believed the combination of these factors would resonate with our investor members and, clearly, it did.
Globe.St.com: What do you believe led 170 individual investors to invest in Hellyer Oaks?
Rezapour: CrowdStreet was able to connect us with a large pool of potential investors along with the tools we needed to successfully promote our offering online. Once we had secured an audience for the deal, it really came down to the strength of the offering itself. We worked hard to secure the deal at a compelling basis, demonstrate traction on the business plan during our contract period and offer a fair structure to investors. CrowdStreet offered a way for us to tell this story online in a one-to-many format and the investor audience responded favorably.
Globe.St.com: Describe the process of acquiring and transacting a large volume of individual investors.
Rezapour: The majority of the investors were acquired through the CrowdStreet Marketplace of accredited investors. The CrowdStreet team helped us create and publish an online posting for the offering and created digital marketing campaigns that drove prospective investors back to the posting and helped boost subscriptions. The combination of the posting, marketing and CrowdStreet's investor network really helped drive investor volume and subscriptions for the deal.
Formigle: Getting the investors subscribed was only part of the battle. Calling capital and closing a deal with 170 investors in a short time frame is where the rubber hits the road. CrowdStreet's investor management software automated the Hellyer Oaks transaction process and made it feasible. I wouldn't recommend trying to subscribe and manage 100-plus investors without it.
Globe.St.com: Why go the syndication route? Why not just take this deal to institutional capital providers?
Rezapour: The Hellyer Oaks acquisition leverages a recent change in Silicon Valley. South San Jose has historically been viewed as a “last in, first out submarket” by institutional investors. However, now that rents in submarkets such as Santa Clara and North San Jose have skyrocketed at the same time that traffic in that portion of the bay has intensified, you're seeing new interest in south San Jose.
In addition, the current vacancy in the south San Jose submarket is mostly big block space. By taking what has historically been a building that catered to big block users and repurposing it as a multi-tenant property, we're tapping into a new source of demand and providing a differentiated product. With cheaper rents and a reverse commute, south San Jose offers tremendous value for sub-50,000-square-foot users, which is the segment of the market where we see strong demand. However, for institutional investors, many of whom still favor core Silicon Valley locations, this story can fall on deaf ears.
SAN JOSE—Demand in South San Jose tends toward sub-50,000-square-foot tenants seeking quality space at less than half the price of North San Jose. Hellyer Oaks Technology Park presented an opportunity to reposition a campus that has historically catered to large blocks users into a multi-tenant format.
Vertical Ventures raised $10 million in crowdfunded equity capital from 170 high-net worth investors to help acquire the property last month. Hamid Rezapour, founder of Vertical Ventures, and Ian Formigle, vice president of investments for CrowdStreet, recently discussed the asset with GlobeSt.com in this exclusive.
Globe.St.com: What attracted you to the Hellyer Oaks Technology Park transaction and how did Vertical Ventures and CrowdStreet connect?
Hamid Rezapour: Hellyer Oaks Technology Park is a 346,000-square-foot, two-building office campus. The project has a great location near 101 in South San Jose with good parking and good access to transit. It's also proximate to a lot of new housing and retail amenities, which tenants really appreciate. The property's location also benefits greatly from a reverse commute traffic pattern. With Hellyer Oaks, we saw a fantastic opportunity to reposition a campus that has historically catered to large blocks users into a multi-tenant format, which is the type of demand we are seeing in South San Jose. Rents in South San Jose are much cheaper than North San Jose, so if you can offer sub-50,000-square-foot tenants quality space at less than half the price of North San Jose comps and in a location with a reverse commute, you will attract them. Once they come to this submarket, they tend to stay.
Vertical Ventures typically joint ventures with institutional equity partners on our portfolio acquisitions. On Hellyer Oaks, we felt it was time to explore crowdfunding instead of our traditional route. We reached out to a few groups and found the right fit with CrowdStreet.
Ian Formigle: CrowdStreet is always on the lookout for sponsors with a proven track record in their chosen geography and asset class. For starters, as a Bay Area-based operator that specializes in Bay Area value-add office deals including San Jose, Vertical Ventures brought immediate credibility as a strong sponsor. Second, the deal had a logical business plan that already had proof of validation. It's rare to find a 346,000-square-foot office deal in San Jose that's had 32,000 square feet of leasing traction while under contract and in the exact multi-tenant format that the sponsor is targeting. That part of the story was compelling.
CrowdStreet also saw opportunity in Hellyer Oaks as we could understand why it might be overlooked by institutional investors while, at the same time, could make sense to individual investors. We believed the combination of these factors would resonate with our investor members and, clearly, it did.
Globe.St.com: What do you believe led 170 individual investors to invest in Hellyer Oaks?
Rezapour: CrowdStreet was able to connect us with a large pool of potential investors along with the tools we needed to successfully promote our offering online. Once we had secured an audience for the deal, it really came down to the strength of the offering itself. We worked hard to secure the deal at a compelling basis, demonstrate traction on the business plan during our contract period and offer a fair structure to investors. CrowdStreet offered a way for us to tell this story online in a one-to-many format and the investor audience responded favorably.
Globe.St.com: Describe the process of acquiring and transacting a large volume of individual investors.
Rezapour: The majority of the investors were acquired through the CrowdStreet Marketplace of accredited investors. The CrowdStreet team helped us create and publish an online posting for the offering and created digital marketing campaigns that drove prospective investors back to the posting and helped boost subscriptions. The combination of the posting, marketing and CrowdStreet's investor network really helped drive investor volume and subscriptions for the deal.
Formigle: Getting the investors subscribed was only part of the battle. Calling capital and closing a deal with 170 investors in a short time frame is where the rubber hits the road. CrowdStreet's investor management software automated the Hellyer Oaks transaction process and made it feasible. I wouldn't recommend trying to subscribe and manage 100-plus investors without it.
Globe.St.com: Why go the syndication route? Why not just take this deal to institutional capital providers?
Rezapour: The Hellyer Oaks acquisition leverages a recent change in Silicon Valley. South San Jose has historically been viewed as a “last in, first out submarket” by institutional investors. However, now that rents in submarkets such as Santa Clara and North San Jose have skyrocketed at the same time that traffic in that portion of the bay has intensified, you're seeing new interest in south San Jose.
In addition, the current vacancy in the south San Jose submarket is mostly big block space. By taking what has historically been a building that catered to big block users and repurposing it as a multi-tenant property, we're tapping into a new source of demand and providing a differentiated product. With cheaper rents and a reverse commute, south San Jose offers tremendous value for sub-50,000-square-foot users, which is the segment of the market where we see strong demand. However, for institutional investors, many of whom still favor core Silicon Valley locations, this story can fall on deaf ears.
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