The Firestone to Become San Jose’s Largest Development
Groundbreaking is imminent on a mixed-use project located at 477 S. Market St. in the SoFA District after $67 million in debt and equity were recently secured for its development by NorthMarq Capital.
SAN JOSE—Groundbreaking is imminent on a mixed-use project located at 477 S. Market St. in the SoFA District after debt and equity were recently secured for its development. NorthMarq Capital arranged $67 million joint venture equity and construction financing for The Firestone.
Nathan Prouty, Andrew Slaton and Briana Harney of NorthMarq’s San Francisco office made up the team handling the financing. During the course of a year, NorthMarq worked closely with the project developer, Acquity Realty Inc., led by Dennis Randall and John Pringle to arrange a joint venture partnership and senior debt.
PCCP provided a construction loan with the remainder of the capital coming in the form of joint-venture equity from Cigna Investment Management and Acquity. The six-story mixed-use development will provide 130 apartments with a shared rooftop terrace and 6,725 square feet of ground-floor retail that will feature a restaurant/bar.
“The Firestone is a well-conceived and thoughtfully designed project in one of San Jose’s most popular and vibrant neighborhoods. A ground-up deal at this stage of the cycle posed some challenges with rising construction costs and healthy supply of new product, but we were able to match up Acquity with a like-minded institutional partner that shares an optimistic long-term outlook for downtown San Jose. The project designed as mid-rise Type III construction positioned it well for immediate execution, while the bulk of projects in the pipeline are high rise and simply don’t pencil right now,” noted Prouty. “This project had broad appeal and we canvassed the market, going to over 50 lenders and investors to identify the best partners for our client.”
The Firestone project near the corner of South Market and Balbach streets will become the newest large development in downtown San Jose once it gets underway. Adobe’s expanding headquarters are within a few blocks of the property as is Google’s to-be-developed headquarters at the Diridon Caltrain station.
“Our San Francisco team accepted the challenge of representing a development start-up, sourcing both equity and construction debt in a market arguably past its cyclical high point. We needed to move quickly to cap significant increases in entitlement costs and projected increases in construction costs,” said Pringle.
The SoFA District features a mix of theaters, restaurants, arts groups, media businesses and architecture firms. The Firestone will have access to Interstate 280, the Convention Center VTA light rail station and Caltrain’s Diridon station.
“We’re excited to see The Firestone, the first of several Acquity-backed projects break ground in downtown San Jose,” Prouty tells GlobeSt.com. “The Steinberg Hart design team’s concept, particularly the activated retail corner which will ideally house a casual dining restaurant, fits well within the neighborhood and should be well received. The cutting-edge amenity package for tenants such as the social clubhouse, community workspace and garden rooftop make for a more vibrant and interactive community for residents than one would expect in an urban in-fill development.”
Capital markets activity in Silicon Valley continued to be healthy through the first half of 2019. Fundamentals remain strong throughout the Bay Area and investor optimism for tech-driven real estate is still in high demand, according to a report by Cushman & Wakefield Silicon Valley’s office. The Valley is one of the few suburban markets in the country to continue attracting investor attention. Debt continues to remain low priced as rates have fallen significantly on benchmark treasuries since the beginning of the year. Historical pricing highs continue to rise on the western side of the Valley and the Peninsula, particularly in areas that are served by Caltrain. Value-add opportunities continue to be scarce, the report says.
Diridon Station plans will differ from the current tech campuses that are isolated from the public and steer workers to private cafeterias, stores and fitness centers. Google plans to include housing, parks and retail spots open to the public.
The station’s ridership is expected to grow eightfold from 17,600 daily passengers in 2016 to 140,000 passengers in 2040, according to the Santa Clara Valley Transportation Authority. And, within the Diridon Station area, approximately 5,000 housing units could be built, according to a city study.
San Jose is the Bay Area’s largest city in terms of land and population. It spans some 180 square miles and is the 10th largest US city in terms of population with more than 1 million residents.
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