Downtown San Jose’s Google village takes major step forward with government property deals

George Avalos| San Jose Mercury News|Link to Article

LiPo Ching/Bay Area News Group

SAN JOSE — Google’s planned village in downtown San Jose has cleared a major hurdle, reaching agreement on proposed prices for selling several government-owned properties to a development venture led by the search titan.

The proposed price for the combined property sales to Google is $67 million for nine parcels at six addresses in downtown San Jose, according to a city staff memo. The properties are owned by a government agency created to unwind the assets and operations of the now-defunct San Jose Redevelopment Agency, which once owned them.

The pricing agreement still requires approvals from multiple government agencies, including the San Jose City Council, before Google can cement a final deal to buy the former redevelopment agency properties. Prices must also be determined for city-owned sites that Google wants. Nevertheless, the proposed pricing sweeps away a significant obstacle in the complex process.

“This is an important step forward. It is one step, but a vital step,” San Jose Mayor Sam Liccardo said. “We are moving forward collaboratively with Google.”


Mountain View-based Google intends to build 6 million to 8 million square feet of offices near San Jose’s Diridon Station and the SAP Center. Those office towers could accommodate 15,000 to 20,000 Google employees.

Government negotiators will now seek to craft a similar agreement with Google over purchase prices for other municipal properties, including the parking lots next to the SAP sports and entertainment center, and a site now used for a San Jose Fire Department training center. Both properties are owned by the city of San Jose.

In the agreement for the proposed purchase of properties from the redevelopment agency’s successor, the most expensive parcel is a parking lot at 8 S. Montgomery St., at Santa Clara Street, south of the sports arena. That 1.6-acre site, known as Lot D, has a proposed purchase price of $17 million.

The remaining properties were determined to be collectively worth $50 million, the city memo stated. They are located at 105 S. Montgomery St., 510 W. San Fernando St., 102 S. Montgomery St., 645 Park Ave. and 150 S. Montgomery St.

Patty’s Inn, a long-time cocktail bar, is located on one of the government properties Google is slated to buy, but the business has declined to comment on the development.

“Google has agreed to the price” for these government properties, said Kim Walesh, San Jose’s director of economic development.

San Jose is taking a sharply different approach to the Google project than the many cities that are hoping to coax Amazon to establish a second headquarters in their communities, Mayor Liccardo said.

“Twenty American cities are falling over themselves to woo Amazon,” Liccardo said, noting that Google has not sought and the city has not offered tax breaks or subsidies. “In contrast, we are selling land to Google for 2.5 times the price that the city of San Jose paid for it. The taxpayers of San Jose are clearly getting their money’s worth on this.”

The city’s redevelopment agency originally paid $26 million for the properties, which now are slated to sell for $67 million.

For slightly over a year, Google and its development ally, Trammell Crow, have been buying vacant lots, industrial properties, retail sites, commercial buildings and residences around the nine parcels in the proposed agreement as part of the company’s plan to create a transit-oriented community in downtown San Jose.

From December 2016 to early January of this year, the tech titan and Trammell Crow together have spent at least $150.1 million buying 23 properties in downtown San Jose. The most expensive of those acquisitions, as of Jan. 3, was a Google affiliate’s purchase in late December 2016 of an old telephone company building for $55 million.

The property deals have occurred primarily on Autumn and Montgomery streets, but deals also have emerged on West Julian, West San Carlos and Cinnabar streets. And multiple property owners say they are in contract to sell their sites to a Trammell Crow or Google affiliate, indicating that the deals are far from over.

Prior appraisals of the parcels outlined in the proposed purchase agreement — done years after the redevelopment agency bought the properties — had placed their values at $125 a square foot, said Bob Staedler, a former real estate manager with the redevelopment agency, and now principal executive with San Jose-based Silicon Valley Synergy, a land-use and planning consultancy.

Today, the entire package of parcels, totaling 6.5 acres, would fetch $237 a square foot, based on the proposed price in the agreement. Lot D would now trade for $241 a square foot. The remaining parcels would fetch $235 a square foot, as a group.

“It’s a great price for the city; they are getting a good value for these, and it’s good to see that these prices are north of some of the recent purchases by Google and Trammell Crow,” Staedler said. “It looks like a fair price for both the city and Google.”

The city is pleased with the progress it’s making with Google.

“We are moving forward to realizing the vision for the Diridon Station area,” Walesh said. “This is a first step to create a phenomenal place.”

Earlier this week, the San Jose City Council approved formation of an advisory panel that will provide input to municipal officials about the Google development. The group will offer community feedback to the city manager’s office as the administration works with Google to develop a proposal to present to the council. The group was originally slated to consist of 35 members, including Adobe Systems, the Silicon Valley Leadership Group and Google itself. But after intense criticism that the group was missing the voices of religious groups and people of color, council members voted to add several groups, including People Acting in Community Together and the Minority Business Consortium.