Long-time and new owners are putting major renovation dollars into their buildings and turning them into creative spaces for the next generation of downtown businesses.
“The buildings in downtown have a character that the rest of Silicon Valley doesn’t have,” said Chris Friese, whose Lift Partners purchased five properties since May 2015, including four acquired in August 2016. “Our investment is in the building stock and the character of the inherent buildings that make up the cultural fabric of San Jose.”
Downtown’s older buildings are unique to San Jose because they are located near transit options and not situated in a campus environment like much of Santa Clara, Sunnyvale and North San Jose, Friese said.
The economics of building upgrades make more sense than starting a new office building from scratch.
“It’s important to start smaller and gradually grow to justify high-rise projects,” Friese said. “It’s harder now to justify breaking ground. Yes, city incentives will motivate some developers, but I think the ‘B’ building stock will, too.”
Upgrades to larger buildings are also a matter of competitive survival, said Talia Kobernick, assistant property manager for Harvest Properties. Upgrades not only help retain existing tenants and attract new tenants, tech companies of Silicon Valley demand better quality spaces, she said.
“Some tech companies prefer non-traditional spaces,” added Nate Guido of Pestana Properties, which owns 84 W. Santa Clara St.
Here are some of the owners and their projects:
San Francisco-based Lift Partners’ San Jose projects include:
1 W. Santa Clara St. — Lift Partners plans interior and exterior renovation of the 120,000-square-foot former JC Penney building constructed in 1946 that it acquired in August 2016 from Saratoga Capital, starting with an address change from 1 N. First to 1 W. Santa Clara St.
“We’re still trying to figure it out,” Friese said. “It will be an open floor plan. The timber in the building has great character and there’s a dramatic center atrium. The first two bays along Santa Clara Street will have a grand gesture of wood and steel beams. The two corner spaces will be double-height retail spaces with industrial character.
“Imagine all four corners of First and Santa Clara busy and occupied again.”
After JC Penney moved out, the building served as home to Lincoln Law School and housed the offices of the Drug Enforcement Agency and IRS, Friese said. “It has a jail cell,” he added.
325 S. First St. — Friese calls the fully leased 31,000-square-foot 1928-built Dohrman Building a “great little building.” This historic building in SoFA includes Cuba-Mex, The Blue Chip, Anderson Brule Architects, The Hoffman Agency, American Institute of Architects (AIA)-Santa Clara, Elemental 8 and other offices. The owners will feature some of the landmark building’s assets, such as exposed wood deck ceilings.
52-78 E. Santa Clara St. and 14 S. Second St. — The Saratoga Capital building and Voodoo Lounge share similar features as the others, such as tall ceilings, exposed brick and beam construction.
“We’re taking a long-term view on investment and making the best decision for the asset without looking at short-term gains,” Friese said.
San Jose-based Imwalle Properties has developed 30 properties around San Jose since 1980. Imwalle’s foray into downtown includes the recruiting of the Muji, USA, store into the Fairmont Annex on South First Street in 2012.
“ I am very long on downtown San Jose,” said Don Imwalle, principal.
Imwalle loves his latest addition, the 9,915-square-foot Avery building at 399 S. First St. Façade improvements are finished and helped to secure new tenants Tac-Oh! Mexican Comfort Food on the ground floor and Avery Lounge on the second floor, he said.
The 1908 building holds a rich history, starting as a plumbing store. In the 1950s, neighborhood watering hole Three Star Bar moved in. Marsugi’s nightclub took over in the 1980s, hosting Nirvana in February 1989 and Weezer in May 1992. The Agenda took the building through the dot-com explosion starting in 1995.
Emeryville-based Harvest Properties joined LaSalle Investment Properties to acquire Class A, 234,835-square-foot 60 S. Market in 2013, and then bought it with a new partner, Intercontinental Real Estate Corp. in 2016. At 60 S. Market, the lobby redesign has been completed, and elevator work and other building systems are under way. Ceilings have opened up to give the space a more creative feel.
Harvest acquired the 413,177-square-foot Towers @ Second, at 75 E Santa Clara St. and 4 N Second St. in June 2015. Coinciding with WeWork’s move into the buildings, Harvest has added a game room and bike clinic to its 13- and 14-story towers originally built from 1972-1974. The upgrade plan also includes improvements to the elevators inside and the patio and paseo between Second and Third streets outside. The Santa Clara Street building has been painted white. The Mercury News moved back downtown into 4 N. Second St. in September 2014.
KBS REAL ESTATE INVESTMENT TRUST III
KBS REIT III has owned the 416,000-square-foot Almaden Financial Plaza, which includes 1 Almaden, 55 Almaden, 99 Almaden and the garage at 3 Almaden, since September 2015. Built between 1979 and 1982, the Almaden Financial Plaza Buildings have recently undergone renovations of the lobbies, common area corridors, restrooms and market-ready suites, according to Embarcadero Realty Services, which manages the properties for KBS.
Work continues on 55 Almaden, where a driveway loop from Almaden Boulevard to the building is under way.
1 Almaden includes City National Bank on the ground floor and a number of law firms, insurance agencies, venture capitalists, and other service businesses. 55 Almaden features Qwest Communications, Synchronoss Technoligies, Bridge Bank, Alliance Credit Union, Zoom Communications and Armanino LLP. 99 Almaden includes more than 40 offices, such as Los Tigre Del Norte, Inc., plus Union Bank.
Ernest (Ernie) E. Pestana started Pestana Properties in the 1960s in San Jose. He owned and operated Mr. P’s
restaurant on the top floor of a six-story building at 285 S. Market St. (Block 8) that was acquired by the Redevelopment Agency in 1997 and torn down. One of his construction companies built the double A-frame Garden City Card Club on Saratoga Avenue, of which he became part-owner after it moved from downtown.
Since 1977, Pestana Properties has owned the 11,000-square-foot, eight-floor building at 84 W. Santa Clara St., finished in 1975. It has been known over the years as the San Jose Entrepreneur Center, Sumitomo Bank building and Crocker Center, and is now rebranded as 84 West. It includes The Glass House on the street level, seven tech companies, professional and financial services firms, consultants, developers/builders and other offices.
At 84 West, Pestana is pushing to diversify its tenant base, recognizing that the building saw high vacancy rates post-recession, said Nate Guido, Ernest Pestana’s grandson, who took over the family business after Ernie Pestana passed away in 2009.
The second floor was completely gutted, the restrooms and lobby were remodeled, and a long-time downtown
architectural firm plans to moves into the space, Guido said. Also, elevators have been completely modernized and a new building management/automation system was installed last year. New ADA-compliant flatwork and façade /storefront upgrades near completion.
Coming up the next 24 months is a ground-floor lobby redesign and phased upgrades to restrooms, corridors, conference rooms, parking garage and other common areas, including a bike storage area.
Mac MILLAN PROPERTIES
Mac Millan Properties has been a long-time investor in downtown, developing and owning the 215,000-square-foot Comerica Bank building at 333 W. Santa Clara St.
“The partnership thought it was time to enhance the exterior of the building,” said Maria Gonzalez, vice president/general manager.
The blue awnings will be replaced by a wood-textured colonnade and a striking entrance to the lobby. The work is expected by April. The building is 90 percent occupied with law, accounting, investment and real estate firms.