SAN JOSE -- Cisco Systems (CSCO) has sold eight buildings in north San Jose to a real estate venture that will give the properties a major facelift, a $150 million deal that signals confidence in future growth for that part of the South Bay and a reminder of an ongoing retrenchment for the networking giant.

TMG Partners and Fortress Investment Group teamed up to buy the campus on Tasman Drive between Rio Robles Drive and Lick Mill Drive, totaling 811,000 square feet. That much square footage could accommodate 3,200 to 4,000 employees.


View Cisco Tasman campus in a larger map

"We believe there is an ongoing demand for large, contiguous blocks of well-located high quality space in Silicon Valley," said TMG Partners chairman and CEO Michael Covarrubias.

The buildings were purchased by TMG for approximately $154 million, or $190 a square foot, according to sources with knowledge of the transaction. Neither the buyers nor the seller disclosed the deal terms.

Over a four-year period, Cisco will exit the buildings. Cisco employees will depart the first of the eight buildings in January.

"The sale is part of Cisco's overall San Jose master plan that includes modernizing our corporate campus and creating an environment for increased collaboration, innovation and productivity," Cisco said in a prepared release in response to questions from this newspaper.

In August, Cisco disclosed plans to slash 4,000 jobs, or 5 percent of its workforce, primarily due to a sluggish economic recovery.

While Cisco struggles, the purchase and renovations are seen as a boon to the Bay Area's largest city.

"This deal definitely shows that buyers see that there is strong demand from tenants who want to move to north San Jose," said Chad Leiker, a broker with realty firm Kidder Mathews.

Samsung, Polycom and Nimble Storage are among the companies that have decided to expand operations in San Jose or relocate to that part of the city. "That area has seen a nice pick up in leasing activity," said Nanci Klein, San Jose's deputy city economic development director.

As each building becomes vacant, TMG will renovate the offices to give them a modern look to appeal to the current crop of technology companies that are seeking to expand, according to Covarrubias.

Contact George Avalos at 408-859-5167 or 408-373-3556.