Palo Alto’s Essex Property Trust Inc. plans another major foray into downtown San Jose with the construction of a 21-story tower at one of the most desirable street corners in Silicon Valley’s only high-rise city center.
Essex is partnering with Cupertino’s KT Properties and Eugene, Ore., -based Spring Capital Group to build 285 apartments at 1 S. Market St.
The address at the southwest corner of Market and West Santa Clara Street is less than one acre, and a site that KT and Spring bought in early 2008 from Haury Properties for an undisclosed sum. The taxable value of the land is not quite $5.4 million. That is up from not quite $5.2 million two years ago, according to the county assessor.
Essex has been one of the most active apartment developers and buyers in the Bay Area in the apartment boom that has gripped the region and nation.
Technically, the developers have not officially submitted—or re-submitted—a permit application because they have not yet paid review fees, Planning Director Joseph Horwedel said in an email message. They have “dropped off” plans for the proposed 216-foot tower, which his office has begun to review, Horwedel said. The Registry also reviewed the plans. The developers are treating the apartment project as the latest iteration of a condo proposal.
“The original design was a high-rise condominium project designed to a use and standard that is no longer feasible in today’s market,” Kevin Sauser, a principal at Portland’s C2K Architecture Inc., explained to Senior City Planner Richard Buikema in an Oct. 15 letter.
“In response to a strengthening jobs and housing market in San Jose, KT Properties and Essex Property Trust have agreed to proceed with the project as a rental apartment project designed to apartment standards and typical unit sizes and mix,” Sauser said.
The change means that average unit sizes will be smaller and the overall cost of the project will be reduced, he said. The letter did not state the anticipated investment.
The project includes nearly 6,000 square feet of ground-floor retail and possible second-floor retail; outdoor, common-area terraces on the fourth and 17th floors; a swimming pool, Jacuzzi, fitness room and shared kitchen area. A six-deck, 420-space parking garage sits next door with half the floors below grade and the remainder above. Renderings show the pool on top of the parking structure.
Spring and KT did not return calls. A spokewoman for Essex said the company expected to be able to comment on the project in the next several weeks.
In the documents filed with the city, the project owner is identified as Essex; KT Properties is identified as the developer, and Market Street Tower Venture LLC as the property owner. Spring Capital is listed as the contract for the LLC. The general contractor is listed as Portland’s Howard S. Wright, a Balfour Beatty company.
KT and Spring originally sought to build condominiums on the corner but put the enterprise on hold at the end of 2007 because of concerns about the economy. The partners were the force behind downtown’s 329-unit Axis condominium development, which also faces Santa Clara Street roughly five blocks to the west of 1 S. Market. Two hundred fifteen of the Axis condos were sold and another 26 in contract as of last month, according to The Polaris Group. Construction began in November 2006 and was completed in August 2008.
Ken Tersini, a principal with KT, said in 2008 that his company embraced a long-term strategy to amass downtown San Jose sites where additional high-rise housing could be built based on his belief that downtown’s revival would accelerate.
Essex has bought and built apartments aggressively in the Bay Area in the last several years, including extensive development in North San Jose. The company said Oct. 23 that it had paid $148 million for the 508-unit Willow Lake Apartment Homes in northeast San Jose.
Earlier this month, Essex said it had paid nearly $70 million for San Francisco’s Park West apartments and the former Waterstone Santa Clara apartments in Santa Clara. It also is building 463 apartments in San Francisco’s South of Market district.
In mid-2010, Essex paid $64.1 million, or more than $198,000 a unit, for downtown San Jose’s 101 San Fernando apartments, a 323-unit, mid-rise development on the cusp of San Jose State University. The project is one block south and five blocks east of the Santa Clara Street site.
Essex also sought to acquire downtown’s 360 Residences, which fronts South Market Street four blocks south of the Santa Clara Street site. The former 213-unit condominium tower was ultimately sold as apartments to Chicago’s Capri Capital Partners LLC, which paid $118 million in exchange for a 4.2 percent capitalization rate.
Horwedel said he has received no application about a second proposed apartment tower also in downtown San Jose near San Pedro Square. San Francisco’s Simeon Residential Properties’ Chairman Russ Pitto told The Registry in July he expected to pursue a 347-unit apartment tower in downtown on the site. He did not respond to a request for additional comment.