Santa Clara County housing agency sells San Jose building at a loss

SAN JOSE — A Santa Clara County housing agency sold an office building in a prime location north of San Jose, losing money on what it paid just two years ago.

At one point, the Santa Clara County Housing Authority intended to have its headquarters in a strategically located office building at 3553 N. First St. in San Jose, adjacent to a light rail track.

But the Housing Authority’s foray into owning office space turned into a financial setback, according to Santa Clara County real estate records filed Sept. 28.

In 2020, the Housing Authority paid $37.35 million for office buildings.

On Sept. 28, the Housing Authority sold the building for $24.5 million, documents filed with the Santa Clara County Records Department show.

This represents a 34.4% decline in the value of the building in the approximately 21 months it has been owned by the housing company.

Alvarez & Marsal Capital Real Estate purchased the office building for all cash through an affiliate, according to county real estate records. State and county business records directly connect Alvarez & Marsal companies with purchasing affiliates.

Real estate investment firms are looking for ways to revive office buildings by finding new missions for traditional office buildings, such as the north San Jose property they just purchased.

“Our current focus is on meeting the demand for ‘creative’ office space in key markets in the western United States through adaptive reuse and relocation of existing assets,” said El Segundo, Los Angeles County. A&M Capital Real Estate, based in In a post on that website.

Only after the purchase was completed in December 2020 and the Department of Housing became the owner of the building did the county government realize that their plans to move headquarters to the North San Jose site had been a mistake.

According to a presentation prepared for the Department of Housing’s Sept. 21 meeting, “subsequent analysis and feedback from staff and stakeholders confirms that the North First Street location is consistent with the agency’s vision for the future. showed no.

The two-story building totals 86,100 square feet and occupies a six-acre lot on the corner of North First Street and Rio Robles. The Tasman Light Rail Station is about two blocks away.

The Housing Authority has determined that the cost of refurbishing the building to transform this property into the agency’s future headquarters may exceed the amount the agency paid for the property.

“Estimates for additional building needs and tenant improvement costs to improve office space ranged from $23 million to $40 million,” the county official’s report said.

The upper end of the upgrade estimate range exceeded the value of the building as measured by its recent purchase price.

An analysis by the Housing Authority found that 60,000 square feet of office space was actually needed, rather than 86,100 square feet, to accommodate future space needs.

The county seat is currently headquartered at 505 West Julian Street in downtown San Jose. This is his two-story office building totaling 35,000 square feet.

“Several years ago, the Santa Clara County Housing Authority was determined to have crossed 505 West Julian,” said a housing agency staff memo prepared for the agency’s February 2022 meeting.

The Housing Authority considered six buildings for its new headquarters before finally choosing a property on North First Street. But it wasn’t until after the building was purchased that I took a closer look at the building’s strengths and weaknesses.

Staff analysis found that the negatives greatly outweighed the positives when comparing the North First Street location to other locations such as downtown San Jose and adjacent neighborhoods.

“Analysis showed that 3553 N. First St. was the least accessible location for clients and staff,” the county agency report said. “Being based in north San Jose means longer commute times for our employees and clients have to travel farther to visit us.”