The San Jose city council approved a plan by Oakland A’s and San Jose Earthquakes owner Lew Wolff to develop a mixed-use office, hotel, and retail project near the San Jose airport. The property which encompasses 66 acres will contain roughly 100K SF of retail, a 300-key hotel, and 1.5 million square feet of office space.

Of the 66 acres, approximately 13-16 will be retained for a future 18,000 seat stadium for the San Jose Earthquakes. The development of the stadium however hinges on the city approving a re-zone of 70 acres of industrial land Lew Wolff controls in the Edenvale district of South San Jose to housing. The plan is that the rezone will bump up the value of the Edenvale land, thereby allowing Wolff to make the tidy profit that necessary for the stadium’s construction.

This is certainly a step in the right direction, but I see a few problems with this plan. The first big one is that the approval of Wolff’s Coleman Avenue Airport land doesn’t seem to hinge on him delivering an Earthquakes stadium at all.

That said, given current construction costs and where the leasing market currently is with respect to rental rates and demand in San Jose, there doesn’t currently seem to be the necessary economic drivers in place to warrant the speculative construction of 1.5M SF of office space.

The second problem has to deal with the Edenvale land in South San Jose. It’s not clear who currently owns the land, but in past reports and talks it was noted that the land is under Wolff’s control (presumable optioned), and not actually owned.

To get its stadium, the city would have to go and rezone the Edenvale land to housing, so that the step up in land value can fund the stadium’s construction. There are problems with this plan as I see it.

The big problem in my opinion, has to deal with property rights and the city’s “behavior”. The city is seemingly considering rezoning industrial land to housing so that a private developer and sports team owner (Lew Wolff) is able to reap the necessary profits he needs to build a soccer stadium. In a time when the Mayor and city have generally turned against converting industrial lands into residential lands, I find this interesting to say the least.

If I were a nearby land owner, or even worse, the Edenvale land owner whose land Lew Wolff has optioned (presuming that is what has happened), I think I would be livid that this particular individual is getting preferential treatment because the city wants him to make the profits necessary to build the stadium.

Even though it seems he would donate the stadium to the city and the Earthquakes would lease it back, I think there might be some lawsuits filed before such a scheme is allowed to take place. I find it doubtful that the city would otherwise rezone 70 acres of industrial land into residential use at this time if it was not for the soccer stadium.

I’m just not sure I’m comfortable with limiting somebody’s property rights because they don’t have a sports team that happens to need a stadium on the other side of town.

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