Hunter Storm and Wolff Get $43M Discount From City of San Jose
April 7, 2009
The City of San Jose has granted Oakland A’s owner Lew Wolff, and Cupertino-based Hunter/Storm Development a $43M discount on the purchase price of land that had been negotiated last year. According to a Mecury News article covering the topic, the City will instead sell 65-acres for $89M instead of the originally priced 75-acres at $132M. The trio intended on developing a 15,000 seat soccer stadium, offices, retail, and hotel on the site on Coleman Avenue which sits across from San Jose Airport.
The City of San Jose bought the property in 2005 for $81M and put another $19M into cleaning it up. According to the article:
The developers will now have until 2011 to deliver the bulk of the new price, paying $7 million to retain their option on the site until then.
Frankly, I’m not sure I understand this deal. Even at $1.5M/acre, this deal won’t pencil given where vacancy and rents are and where they are headed. Add to that the fact that any developer would need to pony up very significant amounts of equity and have major pre-leasing done before they could even get a project like this off the ground makes this discount all the more peculiar because the way I see it, it’s not going to get them to break ground on the most of the development anyways, it just gives them a lower basis moving forward. Good for them, bad for the city.
I wrote about this topic when it first passed in May of 2008. It was blatantly obvious then that the market wouldn’t support the proposed development yet the developers pressed ahead, perhaps knowing that they would just come back and get a discount down the road.
I’ve stopped trying to figure out the City of San Jose.
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Tags: Coleman Avenue, Government, Hunter Storm, Lew Wolff, San Jose, San Jose Earthquakes
Square Feet,
You are the best. All of the other commercial real estate blogs (including mine) pale in comparison to yours.
I agree with your comment about the City of San Jose. I think they better think really hard (and watch their pocketbook) about getting into another deal with Wolff to bring the A’s to San Jose.
Regards. Jordan
thanks for the comment. respond or send me a link to your blog, i’ll add you to my blog roll if you cover silicon valley.
I think this is probably typical of a city. The people who control the public purse strings really don’t have an understanding of the implications of their actions. I’m sure Lew Wolff put spin on his pitch to the city and rather than think hard and deep on the issue they probably saw this as a chance to large scale development going in SJ. And, frankly, the mayor would probably really like to attached his name to a large scale public project, even if it is years down the road.