Davis Management buys San Jose R&D building in Fund V's first California deal

An affiliate of Davis Management Co. has acquired 51 Rio Robles, a roughly 65,000-square-foot R&D and advanced manufacturing building in North San Jose fully leased to a green technology company. IREI first reported the purchase, which marks Fund V's first California acquisition and expands the firm's R&D investment activity into Silicon Valley, where the property sits inside what the buyer calls one of the country's largest concentrations of technology companies — the report gives no purchase price, seller, cap rate, or lease term.

Davis's described business plan is a repositioning rather than a re-tenanting: a new roof, upgraded HVAC and mechanical systems, renovated interior spaces, and exterior improvements around 3,000 amps of 480-volt three-phase power. IREI describes that power as infrastructure suited to R&D, advanced manufacturing, and technology users looking to operate or expand in the region.

Brendan Richards, a vice president of investments at Davis, said the property combines the traits the firm looks for in its national R&D portfolio: substantial power capacity, existing technical infrastructure, and a location amid a dense collection of technology companies. The planned improvements, including new base building systems, are meant to position it for tenants in AI, semiconductors, robotics and other advanced technology industries, he said.

Richards's tenant list is the underwriting. Industrial capital is repricing in two directions, with infill and data-center-linked assets commanding premiums while older product trades flat, and the two criteria Richards names first are the ones a repositioning budget cannot simply buy. The roof, HVAC and interior work read as the cost of holding a building whose value is already in the power and technical infrastructure; pricing the amps, rather than the renovation, is where the entry basis gets set.

How that basis performs rests on the lease term the report omits, since the building's single green-technology tenant has no disclosed expiry. A near-term expiry would make the capital plan a rent reset with the incumbent effectively underwriting the improvements; a long remaining term pushes the payoff past a value-add hold and turns the same spend into a bet on where advanced manufacturing rents clear years from now. The 3,000 amps shortens the list of buildings that can compete for the tenants Davis is targeting, but the lease expiration is what decides whether this is a near-term payoff or a patient one.