ByteDance eyes office sublease deal at S.J. tech campus
SAN JOSE >> ByteDance, an internet titan whose apps include TikTok, is in discussions to sublease multiple big office buildings within a San Jose tech campus, according to commercial real estate sources.
The tech company is in talks for a sublease of buildings at 1193 and 1199 Coleman Ave., according to at least five sources with knowledge of the discussions.
The buildings that ByteDance has under consideration are leased to Yahoo!, a legendary internet portal.
At present, a rental agreement has yet to be signed and there is no assurance that a transaction would be completed.
The buildings that ByteDance is eyeing total roughly 658,000 square feet.
In 2019, Verizon, which bought Yahoo in 2017, struck a deal to lease the buildings in Coleman Highline.
But in 2021, Verizon sold Yahoo to a private equity firm, Apollo Global Management.
Private equity firms often seek cost-cutting as a way to create value and efficiencies in the assets they own and frequently shed real estate holdings.
Seeking to exit rental space through a sublease can be a tactic that a private equity firm employs to chop operating costs for a company that it has bought.
China-based ByteDance has scouted several locations in Silicon Valley for a large new site to accommodate the company's South Bay operations, several commercial property sources said.
However, the company's attempts to this point to find a new location, while wide-ranging, have yet to result in a successful conclusion.
Similarly, the potential deal for space at Coleman Highline is close to being done but still isn't fully completed, sources said.
The three buildings that ByteDance is eyeing for a possible sublease were bought for $780 million in December 2021 by Londonbased investment company AGC Equity Partners.
At that time, the $780 million deal was Silicon Valley's largest property purchase of 2021. The purchase price worked out to about $1,185 a square foot, which is a sky-high value for office space in the Bay Area.
The purchase of the buildings and the interest in them on the part of ByteDance point to ongoing interest from big-time investors in Silicon Valley and other sections of the Bay Area, even in the face of economic uncertainties unleashed by the coronavirus.
Coleman Highline has become one of the most successful tech campuses in Silicon Valley. The other five buildings in the complex are fully leased to streaming services giant Roku.
Property experts weren't sure when the ByteDance sublease deal might be completed, although several said the transaction was close to being finalized.