The Mercury News
02/23/18

Homes in a Hotel? That’s the Plan for This Downtown San Jose Development
By George Avalos

https://www.mercurynews.com/2018/02/23/downtown-san-jose-hotel-will/

SAN JOSE — The developers of a hotel planned for the Diridon train station area in downtown San Jose have filed plans with city officials that sketch the concept of high-rise lodging with guestrooms and permanent residences.

San Jose officials previously indicated a hotel was planned for property purchased in January at 292 Stockton Ave., but new details have emerged about the development plan. The hotel would rise nine stories and have 254 rooms. And in a possible first for San Jose, the hotel also would contain 19 permanent residences, according to a preliminary proposal submitted to San Jose planners.

An affiliate of Dallas-based Kade Development paid $4 million on Jan. 16 for a vacant lot at the corner of Stockton Avenue and West Julian Street, according to Santa Clara County property records. The San Jose Redevelopment Agency was the seller.

“Right now, it’s not an obvious location for a hotel, but when you look at the plans for downtown San Jose, this hotel would be right in the heart of everything that’s going to happen,” said Dharmesh Patel, executive managing director of hotels USA for Colliers International, a commercial realty brokerage. “It’s a bet towards the future.”

The hotel is expected to be a Marriott product, perhaps a Courtyard or Residence brand, according to Patel.

This site is a short distance from the Diridon train station. But it’s also next to areas for potential development by Google, which is eyeing a transit-oriented community of offices and amenities totaling 6 million to 8 million square feet where the search giant could employ 15,000 to 20,000 workers.

Separate from the Google endeavors in downtown San Jose, TMG Partners and Valley Oak Partners are pushing ahead with an office campus of 1 million square feet. Nearby, Trammell Crow has received approval for a huge mixed-use downtown complex of offices, homes and retail that’s called Diridon. In January, Adobe Systems, which now owns three office towers for its downtown San Jose headquarters, paid $68 million for a West San Fernando Street lot where the company intends to build a fourth tower, where 3,000 company employees could work, in a major expansion of the tech titan’s campus.

The planned Kade Development hotel on Stockton Street also stirred the interest of experts because of the 19 condominiums that are part of the lodging venture.

“I don’t recall any other projects in San Jose with this sort of component,” said Alan Reay, principal executive with Atlas Hospitality, which tracks the California lodging market. “This is similar to what you see in places like Manhattan, or Hollywood or West Hollywood.”

What’s more, for-sale residences could provide a financial boost to help the developer obtain a loan for the project — especially amid a boiling-hot residential market in the Bay Area, with median prices of $1 million or more in multiple metro areas of the nine-county region.

“The for-sale component can help the project pencil out, especially with a nine-story hotel on a small lot,” Reay said. “They could be penthouses, selling for a million dollars on up. And the buyers can get all the benefits and amenities of the hotel, the services, the proximity to the Google project and the rest of downtown San Jose.”

The unusual approach for the hotel could be a forerunner for other developments in downtown San Jose.

“With Google going in there, you will see a lot of projects being built in that area,” Reay said. “This is just one of many new projects that will completely change downtown San Jose.”