SAN JOSE — The Santa Clara Valley Transportation Authority plans to seek tenants to co-occupy a downtown San Jose office tower the agency recently bought to serve as its future headquarters.
On May 17, the VTA paid $63.7 million for a 17-story office tower at 488 South Almaden Blvd., according to Jessie O’Malley Solis, the VTA’s director of real estate and transit-oriented development.
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The transportation authority, however, doesn’t intend to occupy every floor in the 390,000-square-foot 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, documents show.
“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, 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.
Not all the floors are available for occupancy, 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.
The VTA has crafted a seven-year brokerage services agreement with a Colliers team to market the building’s office spaces.
“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. “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. Marketing efforts will begin immediately to generate revenue for rental income for VTA.”
The purchase price of the 17-story tower was 60.9% below the property’s assessed value of $163.1 million. That low price could enable the VTA and Colliers to offer reduced rental rates to tenants.
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.”