SAN JOSE — The Santa Clara Valley Transportation Authority aims to scout for tenants to co-occupy a downtown San Jose office tower that the VTA has bought to serve as its future headquarters.
The VTA on May 17 completed a deal whereby
the transit agency paid $63.7 million for a 17-story office tower
at 488 South Almaden Blvd. in San Jose, according to Jessie O’Malley Solis, the VTA’s director of real estate and transit-oriented development.
Related Articles
-
Loan default jolts East Bay hotel in grim sign of frail lodging market
-
San Jose rejects tower project near Valley Fair that residents called a ‘monstrosity’
-
San Jose senior memory care center project advances with property deal
-
San Jose hotel complex with hundreds of rooms flops into loan default
-
Two East Bay hotels file for bankruptcy as lodging market woes widen
The transportation authority, however, doesn’t intend to occupy every floor in the building, according to documents prepared for a June 6 meeting of the VTA’s board of directors.
The VTA sees advantages in being both an owner-user and a landlord in the San Jose tower, the documents show. The building totals 390,000 square feet.
“The building’s amenities and modern infrastructure support a productive work environment for VTA employees while offering the opportunity to generate rental income from floors VTA will not occupy,” VTA chief planning officer Deborah Dagang stated in a document prepared for the meeting.
The VTA is hiring Colliers, a commercial real estate firm, to find one or more tenants to occupy several floors in the building, the transit agency documents show.
“VTA intends to occupy floors three and 11 through 18, leaving up to seven floors available for tenant lease,” the transit agency stated in the agenda packet.
Not all the floors are available for occupancy because some contain significant amenities, according to the VTA.
“The remaining floors are common areas offering amenities such as gym, yoga room, cafe and a future VTA board of directors meeting room,” the agency stated in the meeting materials.
The VTA has crafted a seven-year brokerage services agreement with a Colliers team to market the building’s office spaces to tenants.
“Colliers was selected as they have depth of experience both in the downtown San Jose commercial lease market and depth of knowledge of the building, as well as experience working with public agencies,” the VTA stated in the meeting documents.
The purchase price was 60.9% below the property’s assessed value of $163.1 million. This ultra-low price could enable the VTA and Colliers to offer reduced rental rates to tenants they seek to recruit for office spaces in the tower.
“The approval of the contract with Colliers would allow for lease marketing services to begin as soon as possible with the goal of achieving full occupancy of non-VTA floors,” the agency stated in the agenda document. “Marketing efforts will begin immediately to generate revenue for rental income for VTA.”
The principal entity in the selling group was an affiliate of EQ Office, which is owned by The Blackstone Group, a New York City-based investment company.
In 2021, the
seller paid $153.7 million
for the office tower, which sits next to the San Jose Convention Center, property records show.
“This was probably a once-in-a-lifetime deal in terms of the purchase price,” Solis said in an interview with this news organization in May. “Our agency was aware of the state of the office market right now.”
