SAN JOSE — A game-changing $113 million deal to bring San Jose State University students to a hotel tower is deemed to be the “ultimate win-win” for the school and the city’s downtown district, experts say.
SJSU is poised to use the deal to bolster the university’s emerging strategy to transform all of downtown San Jose into its campus as the school’s influence widens and enriches the city’s entire urban core, not just the areas adjacent to the campus.
“We are going to be a bigger and bigger part of the downtown,” said Charlie Faas, San Jose State’s vice president for administration and finance.
Long gone are the days when San Jose State’s impact ended at South Fourth Street and had little or no bearing on the central and western parts of downtown San Jose. In times past, SJSU’s influence was primarily confined to the eastern sections of the downtown.
Faas now believes the impact of the university will extend well over a mile in distance from the campus to the Diridon train station on the western edges of the city’s urban core.
“Our campus is all of downtown San Jose,” Faas said. “Our students are all over this city.”
Throckmorton Partners, a Bay Area real estate firm, bought the 264-room southern tower from a group headed up by business executive Sam Hirbod. Spartan Village on The Paseo is the expected name of the just-purchased tower, which SJSU is leasing from Throckmorton.
“This is the ultimate win-win,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy. “SJSU students will be in great housing that will be walkable to the campus. The Paseo will be activated by students and much more vibrant.”
An estimated 700 to 800 SJSU students will be housed in the just-bought tower. In two years, SJSU will have the opportunity to buy the southern tower from Throckmorton.
“This shows how converting hotels to alternative use is having a big impact on the hotel market,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging industry. “A lot of hotels are being purchased and converted to affordable housing or housing for the homeless.”
Hirbod’s group retains ownership of the 541-room northern tower of the Signia by Hilton San Jose, which will continue to operate as a top-notch full-service hotel in the wake of the transaction.
“Spartan Village on The Paseo is going to bring vibrancy and so much life to this area,” said SJSU President Dr. Cynthia Teniente-Matson.
In the coming months, students who have been admitted for the 2024-2025 academic year will be receiving information about their housing options, including for the Spartan Village on the Paseo in what will be the former hotel tower.
The $113 million value for the package includes the $73 million purchase price for the south tower, according to multiple people involved in the transaction.
Besides the core purchase price, an additional $40 million is expected to be spent on improvements, loan fees, origination costs, property taxes and separation of utilities from the northern and southern towers, according to Faas.
Marcus & Millichap commercial real estate agents Steve Jackson and Joe Owens represented the property buyer. JLL commercial real estate agents Matt Kroger, Brandon Geraldo, Ryan Wagner, Max Machiorlette, Melvin Chu, Charles Halladay and Mike Huth led the efforts to sell the hotel’s southern tower on behalf of Hirbod’s group.
A wide-ranging revamp of the hotel space is slated to begin in short order and be completed in August 2024.
“Plans include a major renovation of the lobby and second-floor mezzanine spaces into a student-centric environment to support social activities and programs,” SJSU said in a prepared release. “Amenities will consist of an expansive dining area and a community kitchen, a fitness center, a games room, co-learning spaces and a study lounge in the sky bridge” that crosses over The Paseo.
San Jose City Councilmember Omar Torres, an SJSU alumnus, recalled living in rundown student housing on South Eighth Street near the campus. He recounted an incident of a leaky roof in his residence that required a week for the landlord to remedy.
Torres believes the potentially enticing features of Spartan Village on The Paseo provides a welcome counterpoint to the forbidding campus-area living conditions of past decades.
“This strategic move bolsters our downtown economy,” Councilmember Torres said. “Let’s be real. If it wasn’t for San Jose State University, we wouldn’t have a vibrant and thriving downtown San Jose.”
Torres and others are convinced that the 700 to 800 SJSU students who will live in the new university housing tower will make a big difference for downtown San Jose.
“As students become a greater part of the downtown community, local businesses will benefit from increased foot traffic, leading to positive economic benefits for our entire area,” Torres said.