SAN JOSE — A shuttered drug store site that’s one of the anchors of a San Jose retail center has been bought by a local real estate investment group.
The just-bought retail building is the site of a former CVS drug store and pharmacy at 1685 Tully Road in San Jose.
VQ5 Properties, a real estate group based in San Jose, bought the building for $10.5 million, according to documents that were filed on Jan. 24 with the Santa Clara County Recorder’s Office.
The buyer is affiliated with Tuong Vy Nguyen, the property records show.
The building totals 26,500 square feet, according to a marketing brochure for the site that was circulated by CBRE commercial real estate agents Rick Shaffer and John Shaffer.
“(The) primary trade area includes two of San Jose’s most affluent communities, Silver Creek and Evergreen,” CBRE stated in the marketing flyer.
The flyer also noted the building has “excellent visibility” since it is near the intersection of Tully Road and King Road.
The seller of the building was Longs Drug Stores California. In 2008, CVS Health bought Longs Drugs. After the transaction, CVS converted the Longs retail sites to stores with the CVS brand name.
The CVS store closed during the fall of 2022, based on posting dates on the Yelp website and image capture dates for Google maps.
A number of restrictions on future uses of the property accompanied the purchase transaction, the county records show.
“No part of the property shall be leased or used for any of the following uses: a pharmacy mail order facility, a drug store, a pharmacy prescription department, or a retail health center,” a document that accompanied the purchase deed stated. A CVS “minute clinic” was listed as a prohibited use.
Among the allowed uses: “physician, dentistry, or other health care offices or practitioners that are separately operated and not located in any retail store or establishment,” the county records state.
LOS GATOS — Two downtown Los Gatos commercial properties in prime locations have been seized by a lender through foreclosure of a delinquent loan for the sites.
The Los Gatos properties that were foreclosed are an office building at 2 North Santa Cruz Avenue and an office and restaurant building with addresses of 143 and 151 East Main Street, according to documents on file with the Santa Clara County Recorder’s Office.
The foreclosure is a reminder that financial setbacks can haunt real estate investors even in upscale commercial property markets such as downtown Los Gatos.
The lender that now owns the property in the wake of the foreclosure auction is W Financial, county real estate records show.
W Financial provided a $20.5 million loan in 2021 to Kenneth Ryan Koch, a real estate executive who has addresses in El Dorado Hills and Grass Valley. A Koch affiliate called Esckoch bought the two properties a few years ago.
The opening bid in the foreclosure auction, which lasted a few minutes with several rounds of bids, was $1 million, which was set by the lender, whose representative was trustee Beacon Default Management.
A real estate investor placed multiple bids, with the lender continuously topping the outside investor’s bids at the end of each round.
Ultimately, the investor dropped out when the lender’s bid reached $7 million.
Since lenders typically are averse to owning foreclosed properties on a long-term basis, it’s possible that W Financial will attempt to find a buyer for one or both properties.
The East Main Street building’s tenants include the Cafe Dio restaurant and espresso bar and the Design by Mish furniture store.
The North Santa Cruz building’s tenants include a real estate office and a travel agency.
Downtown Los Gatos is one of the top-notch real estate markets in the Bay Area, which means commercial property foreclosures due to delinquent loans are a relatively rare circumstance.
SAN JOSE — A tech giant that has come under increased scrutiny has moved into San Jose offices where the company could employ hundreds — or even thousands — after completing a Silicon Valley real estate mega-deal.
TikTok app owner ByteDance has moved into a big office complex that’s part of the Coleman Highline mixed-use tech campus in San Jose across the street from the city’s airport, according to municipal officials and direct observation by this news organization of the company’s work site.
China-based ByteDance completed a deal around September 2022 to sublease 658,000 square feet of new office space that encompasses the entirety of two buildings with addresses of 1193 and 1199 Coleman Avenue in San Jose.
That’s potentially enough office space to accommodate 2,600 to 3,900 workers, based on typical space ratios for employees in modern office sites. The sublease was one of the biggest rental transactions of 2022 in Silicon Valley.
The tech giant’s TikTok app is a social media platform that enables users to host videos that can last from several seconds to 10 minutes. TikTok’s owner also is thought to be making a push into e-commerce on the platform, which has more than 1 billion users, including numerous high-profile celebrities.
“ByteDance has a leading platform in which the community, young people and many others, are very engaged in using,” said Nanci Klein, San Jose’s director of economic development. “We welcome ByteDance to San Jose.”
The company arrives in San Jose with considerable controversy and scrutiny in tow as it faces heightened scrutiny and concern on the part of federal lawmakers and regulators.
In June 2022, a member of the Federal Communications Commission called on Apple and Google to remove TikTok from their app stores over U.S. concerns ByteDance is under pressure to allow officials with the government of China or the Chinese Communist Party to access TikTok users’ sensitive data.
Two United States senators, Mark Warner (D-Virginia) and Marco Rubio (R-Florida), urged in July 2022 that the Federal Trade Commission conduct an investigation into ByteDance and TikTok over the allegations of improper surveillance and access by Chinese government agencies.
ByteDance responded soon after that it was taking steps to ensure the data was protected.
“We are addressing who has access (and why they need it) and where those people are as two critical parts of our security protocols,” Michael Beckerman, ByteDance head of public policy, Americas, stated in a blog post. “Minimizing employee access to U.S. user data and minimizing data transfers across regions — including to China” were among the company’s goals, Beckerman added.
Despite these uncertainties, what is clear is that ByteDance has become a major addition to San Jose’s corporate mosaic.
The company’s arrival also ends a revolving door of companies that were expected to occupy the space.
In 2019, Verizon Media leased the buildings and the property’s developer broke ground on the huge new addition to the Coleman Highline tech campus. Verizon Media intended to employ about 3,400 in the two office buildings.
After that, Verizon decided that it would place its subsidiary Yahoo at the Coleman Highline site, a relocation that took on some urgency after Google bought Yahoo’s Sunnyvale headquarters and other buildings for $1 billion.
At one point, a big Yahoo sign was perched prominently on the roofline of one of the office buildings.
In 2021, however, those plans were abandoned after Verizon sold Yahoo to a private equity firm. Verizon then sought to sublease the Coleman Highline space since neither Verizon nor Yahoo would be moving into the site.
Despite the shifting options for the occupancy of the site, it’s clear that the office buildings were deemed to be valuable since they were fully leased on a long-term basis due to the original Verizon lease in 2019.
In 2021, London-based AGC Equity Partners, an investment firm, paid $780 million for the two buildings, one of the biggest property purchases by dollar amount that year in the Bay Area.
Now, a ByteDance sign is located at one of the key entrances to the ByteDance section of the Coleman Highline campus. People can be seen arriving at and leaving the employee parking garage next to the ByteDance offices.
Coleman Highline is now fully occupied and has to major tech anchors operating on the site. In addition to the ByteDance sublease, streaming media titan Roku leased multiple buildings a few years ago. Hotel rooms and housing are also being added to the Coleman Highline campus.
“The vision to have well over a million square feet of development right across from the airport at the gateway to downtown San Jose has really worked out,” Klein said.
SUNNYVALE — A tech company has sold to a veteran real estate company a Sunnyvale site where the tech company has been operating locally.
The office and research building was bought for $31 million, according to documents filed on Jan. 20 with the Santa Clara County Recorder’s Office.
Fujitsu North America sold the building to an affiliate of San Francisco-based PSAI Realty Partners, the county property records show.
PSAI is active in the Bay Area real estate sector, with a number of purchases and sales in the Silicon Valley market in recent years.
The just-sold two-story building totals 134,200 square feet, according to an archived version of a building sales brochure that JLL, a commercial real estate firm, circulated.
“The property is currently 100% occupied by Fujitsu North America, which will execute a leaseback through September 2023 and vacate upon expiration,” the JLL marketing package stated.
The building was constructed in 1980, the JLL brochure states. The structure sits atop a parcel totaling about 8.3 acres, county property records show.
A few years ago, a big campus next to the just-sold Cobalt Way building that Fujitsu occupies was bought by a veteran real estate company.
In 2020, Menlo Park-based Lane Partners paid $104 million to buy six buildings on East Arques Avenue in Sunnyvale.
The site that Lane Partners bought totals 26.3 acres and has addresses that include 1200, 1230, 1240, 1250, 1260, 1270, and 1280 E. Arques Ave., according to JLL.
Both the recently bought Fujitsu building and the adjacent campus are deemed to be in prime locations in the Bay Area.
“Ideally accessed by both Lawrence Expressway and Central Expressway, 350 Cobalt sits in the center of the world’s most innovative and diverse tenant base,” JLL stated in its marketing brochure. “Numerous high-profile and growth-oriented campuses including Intuitive Surgical, Apple, Applied Materials, and Texas Instruments” are located in the vicinity.
SAN JOSE — A downtown San Jose site where highrise housing is being planned has been put up for sale by a China-based real estate firm whose top leaders include a principal executive who has been arrested in London.
The Pacific, as the residential project is known, is deemed to be in a prime location in downtown San Jose, and has received final city approval.
CBRE, a veteran commercial real estate firm, has been hired to market the choice property. CBRE executive vice president Jef Henderson and first vice president Jon Teel are leading the sales effort. CBRE executives Andrew Behrens and Jesse Weber are providing debt and finance expertise in the selling endeavor.
“This property is in the epicenter of growth and development in downtown San Jose,” Teel said.
The highrise housing is being eyed on a property that’s a former Greyhound bus terminal on the corner of South Almaden Avenue and Post Street.
Despite the apparent advantages of the site as a housing development, the project’s principal owner and developer, Z&L Properties, has yet to break ground.
“Putting the Greyhound station site on the market and a transaction to buy it is inevitable,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy. “If you look at their track record, Z&L just doesn’t have the wherewithal to develop properties.”
The developer’s inability to break ground fits a pattern. Z&L Properties has struggled mightily with its Bay Area property portfolio, which is located primarily in downtown San Jose and San Francisco.
China-based Z&L Properties has completed just one Bay Area project, a double-tower housing highrise in downtown San Jose near San Pedro Square with roughly 640 units. Only one tower is available for occupancy.
The company has also proposed a pair of housing high-rises and the revamp and rescue of a historic church at 252 N. First St. in San Jose. Neither tower has been built and the old church is covered by a tattered black tarp.
In 2021, Z&L Properties yielded ownership of one of its development sites, a 1.6-acre property near the corner of Terraine Street and Bassett Street. Z&L’s plans for a big residential tower at that location had stalled.
An alliance led by global developer Westbank, local developer Gary Dillabough, and San Jose-based Terrascape — a firm headed by real estate veterans Tony Arreola and Mark Lazzarini — paid $11.4 million for the choice Terraine Street parcel. The property is in a downtown district known as the North San Pedro neighborhood.
The Greyhound terminal site that’s up for sale has received final approval from the city for the development of 708 housing units. The property has addresses ranging from 60 to 70 South Almaden Avenue in San Jose.
The attempt to sell the Greyhound site arrives at an uncertain time for Z&L Properties.
Zhang Li, a real estate tycoon and principal executive with Z&L Properties, was detained in London in December 2022 in connection with a U.S. investigation into possible kickbacks and bribery involving a project in San Francisco.
A court in London was told last month that Zhang was wanted in the United States over an investigation into the payment of bribes to San Francisco city officials linked to the granting of permits for a project in that city.
Despite the legal turmoil that swirls around Zhang, the prospects could be favorable for the bus terminal development site.
“As one of the most dense development sites” in downtown San Jose, “this will be the future anchor of a whole neighborhood spiraling around the old Greyhound site,” said Mark Ritchie, president of Ritchie Commercial, a real estate firm.
A new owner of the Greyhound property would control a site near and next to several office towers whose occupants might want to live near their workplace.
“You don’t want to have 50,000 people coming into downtown San Jose every weekday and then 50,000 people leaving every night,” Teel, the CBRE executive, said. “You want people to be able to live, work and play downtown.”
Among the existing and future office projects in downtown San Jose that could bolster the new housing development:
- Adobe is preparing to move into a new office tower at 333 West San Fernando Street where the tech titan would employ thousands.
- An office tower at 200 Park Avenue has been completed by veteran Bay Area development firm Jay Paul Co.
- Park Habitat, a tower with offices and gardens at 180 Park Avenue, has broken ground. Global mega-developer Westbank and local developer Urban Community are working to build this project.
- A mega campus bounded by Almaden Boulevard, West San Fernando Street, South Market Street and Park Avenue has been proposed by Jay Paul.
Google continues to push ahead with its development of a new neighborhood of office buildings, homes, restaurants, shops, entertainment sites, cultural loops and open spaces near the Diridon train station and SAP Center where the search giant could employ up to 25,000 tech workers.
“The Greyhound site is a good location for residential,” Staedler said. “A larger residential population is desperately needed in downtown San Jose.”
OAKLAND — Office vacancy levels are rising in the Oakland area, but rents are also on the uptick as the real estate market confronts uncertainties over a wobbly economy, high prices and rising interest rates.
The Oakland-area office vacancy rate was 18.6% during the October-through-December fourth quarter of 2022, according to a new report from CBRE, a commercial real estate firm.
The latest vacancy rate was up from a 17.4% level in the July-through-September third period. The Oakland area includes downtown Oakland, Oakland’s Jack London Square district, the Oakland airport area, Berkeley, Emeryville, Richmond and San Leandro.
Downtown Oakland endured the region’s highest office vacancy rate in the fourth quarter of 2022 at 25.3%, CBRE reported. That was up from 24.1% in the third quarter of 2022.
Emeryville posted a 23% office vacancy rate in the fourth quarter, which was a big jump from the 18.1% vacancy rate in that city in the third quarter.
Among other notable markets in the area: Office vacancies during the fourth quarter of 2022 were at 12.6% in Berkeley, 12.5% in Richmond and 11.7% in Oakland’s Jack London Square district.
Three markets managed to post single-digit office vacancy rates: the Oakland airport area was at 9.9%, Alameda was at 7.2% and San Leandro was at 4.1% in the fourth quarter.
Office rental rates were a bright spot in the report. Asking rates for office space in the Oakland market area were $4.52 a square foot per month during the fourth quarter. That was an increase from $4.50 a square foot in the third quarter in this region.
The region’s largest office lease in the fourth quarter occurred in Alameda when Exelixis leased 100,300 square feet at 1410 Harbor Bay Parkway.
CBRE stated that no notable office purchases occurred in the market during the final three months of the year. The real estate firm blamed macroeconomic challenges for this slowdown.
“The lack of office sales over 10,000 square feet in this market can be largely attributed to the increase in interest rates during 2022,” CBRE stated in the report, which was prepared by the brokerage’s Oakland office.
Despite the feeble purchasing activity over the final three months of the year, CBRE experts believe that buyers might emerge in more robust numbers in the next several months as prices weaken for office buildings and pressure intensifies on owners to sell their properties.
“Buyers eagerly await price discovery and distress opportunities, all of which will begin to present themselves in 2023,” CBRE stated in the report.
SAN JOSE — A San Jose office building that had been seized through a foreclosure in recent years has managed — for now — to avoid a second auction and foreclosure after landing some financing.
The building, located at 826 North Winchester Boulevard in San Jose, had been scheduled to be auctioned off on Jan. 6, but the sale was canceled on Dec. 29, soon after it landed two new loans.
The new loans provided a combined $1.23 million in financing to an affiliate headed up by Kenneth Ryan Koch, a Grass Valley resident.
Tengjun Wang IRA provided about $728,300 in financing for the property and Emerson Vista provided $505,000 in funding, documents filed on Dec. 15 with the Santa Clara County Recorder’s Office show.
A posting by the trustee in the pending foreclosure showed that the auction of the property was canceled as of Dec. 29.
A loan default notice that Socotra Capital, the principal lender for the property, had filed appears to remain in effect, however.
In December 2021, Socotra Capital provided a $6.45 million loan to finance the property. Until several days ago, Socotra was preparing to offer the property for auction or to seize it through foreclosure.
Since the start of the coronavirus outbreak nearly three years ago, the building has had a trio of owners and faced two foreclosure proceedings.
Numerous property transactions show that many investors still hunger for Silicon Valley office buildings despite current economic uncertainties.
Even so, the delinquent loans that have plagued the property are a reminder that more than a few commercial properties in the Bay Area are mired in financial woes.
The current string of owners for the property originated in the spring of 2020, a review of county real estate records shows.
Kenneth Colbert, a Redondo Beach-based real estate executive, paid $8.25 million for the building in March 2020. That was the first month of coronavirus-linked business shutdowns crafted to combat the spread of the deadly bug.
At the time of the purchase, a Colbert-headed affiliate obtained a $6.1 million loan to finance the acquisition.
Eventually, the property’s mortgage became delinquent and the building was auctioned off through a foreclosure proceeding.
In June 2021, a group headed by Los Gatos-based Sridhar Capital paid $2.9 million to buy the office building during the auction.
In December 2021, the affiliate headed up by Kenneth Ryan Koch paid $10.75 million for the property. At the same time, the Koch-led group also obtained the financing of $6.45 million from Socotra for the office building’s purchase.
Koch has not responded to requests from this news organization for comment regarding the situation.
Two of the recent owners of the property envisioned the 0.6-acre as a site where housing development could occur.
In 2021, Kenneth Coleman’s group proposed a mixed-use project with ground-floor retail or restaurant uses. Residences would sprout on the floors above, a summary of the planning documents shows.
In May 2022, Kenneth Ryan Koch’s group proposed a five-story mixed-use development that would have included housing.
The two mixed-use projects were never built. The city planning records indicate that neither proposal received municipal approval.
The office center, known as Winchester Professional Building, stands empty and is bordered by a chain link fence. Graffiti mars multiple walls of the structure.
BERKELEY — A housing highrise in downtown Berkeley is pushing ahead with the purchase of a site where a residential tower with hundreds of units is being eyed.
Landmark Properties has bought a mixed-use retail and residential building at 2190 Shattuck Ave. that includes a Walgreens store in downtown Berkeley, documents filed with the Alameda County Recorder’s Office show.
Acting through an affiliate, Georgia-based Landmark Properties paid $27.7 million for the site, which has the store on the ground floor and residential units on the second floor, according to the Nov. 23 filing with the county agency.
The seller was an affiliate of PGIM Real Estate, an asset investment unit of Prudential Financial. The PGIM affiliate paid $23 million when it bought the property in 2015. PGIM has been steering the property through the city approval process.
The project developer aims to bulldoze the existing building and replace it with a housing highrise, city plans show.
The tower would be 25 stories high, making it one of the tallest buildings in Berkeley.
The developer intends to build 326 dwelling units in the tower. Some of the dwellings will be affordable.
On the ground floor, the developer is eyeing commercial uses, which could include retail, restaurants and offices, or some combination of these three, the planning documents state. The ground floor would also contain lobbies.
Parking is expected to be in the basement of the tower, the Berkeley city filings show.
The tower is also expected to include a roof deck totaling 9,700 square feet, according to the proposal.
An estimated 32 or 33 units are expected to be set aside for people of very low-income levels, the documents on file with the city show.
Landmark’s real estate portfolio in the Bay Area consists of two projects, both in Berkeley, other than the one on Shattuck Avenue.
The other Landmark properties in the Bay Area are The Standard at Berkeley, a 318-unit apartment complex at 2580 Bancroft Way; and Stonefire Berkeley at 2010 Milvia St., according to the Landmark website.
SAN JOSE — A veteran real estate firm hopes to take the mundane out of self-storage with a new San Jose complex that offers state-of-the-art facilities in a high-profile location.
Silver Creek Self Storage, created by Toeniskoetter Development, opened in two phases this year, with the most recent segment opening a few weeks ago.
“This doesn’t look like a self-storage center,” said Chuck Toeniskoetter, chairman of the development firm that bears his name. “This is a very distinctive facility.”
The complex, located at 5878 Silver Creek Valley Road in south San Jose, contains slightly over 1,100 units and consists of two buildings that offer a combined 107,400 square feet of space.
A portion of the center is tucked into a hillside and one building that’s next to Silver Creek Valley Road features glass facades. Toeniskoetter said he hopes the new center, perched along a curve of the road, can serve as a gateway to that section of San Jose.
Ultimately, however, it all comes down to demand for the units.
About 180 of the 1,123 units are leased, which is a 16% occupancy rate. The first phase opened around July and the second phase opened in November.
“The demand appears to be there,” Toeniskoetter said. “We are very encouraged by the demand we are seeing.”
Still, some softness has appeared in the self-storage market, according to research reports from Yardi Matrix, which provides an array of research reports related to commercial real estate, including the storage sector.
Among the challenges for self-storage: Home sales have begun to wobble in the face of fast-rising interest rates.
“Home sales, a major driver of storage demand, have slowed sharply in recent months as rising mortgage rates have made homebuying less affordable,” Yardi Matrix stated in a report on the self-storage industry that the company released on Nov. 17.
Additional obstacles could confront the self-storage industry, however.
“As inflation persists and a recession is increasingly likely, households are cutting expenditures on non-essential items such as storage,” Yardi Matrix stated in its report.
Nationwide, in the South Bay region, and in the Peninsula and East Bay region, monthly rents for self-storage units fell in November compared with October, Yardi Matrix surveys show. The survey measured average monthly rents for self-storage units that are 10 feet by 10 feet in size.
During the one-month period, rents fell by 1.4% nationally, 1.1% i the South Bay area and 0.5% in the Peninsula/East Bay area, according to Yardi Matrix.
However, compared with about a year ago, rents are rising in the South Bay area and other regions.
Over the approximately one-year period, self-storage rents are up 7.1% nationwide, 2.2% in the South Bay region and 2.4% in the Peninsula/East Bay area, a Bay Area News Group review of reports from Yardi Matrix shows.
Despite the potential headwinds, Toeniskoetter said he remains confident in the new storage facility’s prospects.
That confidence occurs partly because of the state-of-the-art features in the complex.
Toeniskoetter says 1,086 of the units are climate-controlled. The complex also has three elevators and is solar-powered. Climate controls in the units ensure temperatures that range from 55 degrees to 75 degrees.
High-security cameras dot the facility. Door alarms that are coded to individuals can provide real-time information on who accesses a unit and when.
“It’s moving along very nicely,” Toeniskoetter said. “We are right on schedule with how leasing is going.”
SAN JOSE — A real estate tycoon whose China-based development firm has proposed Bay Area projects, including some in downtown San Jose, was detained in England over a San Francisco corruption probe.
Zhang Li, a principal executive with Z&L Properties and co-chairman and chief executive officer of Guangzhou R&F Properties, has been detained in connection with an investigation into possible kickbacks and bribery involving a project in San Francisco.
A court in London was told this week that Zhang was wanted in the United States over an investigation into the payment of bribes to San Francisco city officials linked to the granting of permits for a project in that city, according to published reports, including one from Reuters.
R&F Properties acknowledged that legal proceedings were underway involving Zhang, the company stated in a filing with securities regulators in Hong Kong.
“The company notes that there are media reports concerning the grant of bail to Mr. Zhang Li, a director of the company, by a court in London in connection with a case pending in the United States that involved Z&L Properties,” Guangzhou R&F Properties said in the regulatory filing.
R&F Properties distanced itself from Z&L Properties, even though the filing lists Zhang as an “executive director” of R&F. Zhang is also a co-funder of R&F Properties, according to the company’s website.
“The company wishes to clarify that it did not provide any security money for the bail, it has no interest in Z&L Properties (which is owned by Mr. Zhang Li and his affiliate), and the case will not have any material adverse impact on the company’s business and operations,” R&F stated in the filing.
Z&L Properties, whose principal executives include Zhang, has proposed multiple housing towers in downtown San Jose and one mixed-use development in San Francisco.
Among the San Jose projects that Z&L Properties, which is based in China and has a Foster City office, has proposed:
- Two residential towers at 188 W. St. James St. in San Jose have been built but are only partly occupied. The towers total 640 units, consisting of roughly 320 units in each tower.
- A pair of housing highrises and the revamp and rescue of a historic church at 252 N. First St. in San Jose. Neither tower has been built and the old church is covered by a sometimes tattered black tarp.
- A project of two housing towers that would replace a former Greyhound terminal at 70 S. Almaden Ave. This project has been delayed to the extent that a key permit has expired on the proposed development.
In 2021, Z & L yielded ownership of one of its development sites, a 1.6-acre property near the corner of Terraine Street and Bassett Street. Z & L’s plans for a big residential tower at that location had stalled.
An alliance led by global developer Westbank, local developer Gary Dillabough, and San Jose-based Terrascape, a firm headed by real estate veterans Tony Arreola and Mark Lazzarini, paid $11.4 million for the choice parcel. The property is in a downtown district known as the North San Pedro neighborhood.
In the case of the one downtown San Jose project that Z&L has been able to complete, one of the towers is empty and the other is gradually adding occupants as people buy condominium units in the highrise.