SAN JOSE, CA-CarrAmerica Realty Corp. picked up two prime class A office/R&D buildings here totaling 176,000 sf for $25.8 million, which translates to $146.50 per sf. The fully leased two- and three-story steel-frame buildings are located at 250 and 300 Holger Way in North San Jose, in the Corporate Technology Center. The off-market deal will provide CarrAmerica a first-year yield of 9%.Publicly traded Redback Networks used to occupy both buildings and a few others in the park on long-term leases at triple-net lease rates that started at around $2.80 per sf per month and had 5% annual bumps. In November, the company filed for Ch. 11 bankruptcy protection from creditors. The company emerged from bankruptcy in January having shed all but one of the leases, its 99,000-sf headquarters location at 300 Holger Way. Rather than its original long-term lease, however, Redback is now on a three-year term at a triple-net rate that starts at $1.09 per sf per month and works its way up to $1.30 before it terminates in October 2006, according to SEC filings.The 77,000-sf building at 250 Holger Way is now occupied by Agere Systems. The Allentown, PA-based company is on a 10-year lease that also starts in the low $1 range and has annual 3% bumps. Because of the low rents the tenants are paying, CarrAmerica’s Northern California managing director Christopher Peatross says he’s more excited about the short-term Redback lease than he is about the long-term Agere deal. “I think that market rates will rise faster than 3% per year in that market,” he says.Peatross says he learned of the two buildings potential availability because CarrAmerica was also involved in the Redback bankruptcy. In addition to its buildings within the park, Redback also leased one of CarrAmerica’s buildings a few miles down the road. Peatross was trying to fill his vacancy with Agere when he learned the company really wanted to be in 250 Holger Way. So Peatross called GMAC and offered to buy the building contingent upon GMAC leasing it to Agere. “I wish I had 10 more transactions like this,” says Peatross. “There’s so much capital out there chasing deals that it’s hard to find good product that isn’t overpriced or overbid.”

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