Shea Properties jumps into Milpitas rentals
Shea Properties plans to build 204 units at 1201 S. Main St. in Milpitas. The four-story structure will feature apartments that wrap around a parking structure in the middle of the site.
Shea Properties Inc. has purchased a 2.7-acre parcel near the planned Milpitas BART station where it intends to build 204 apartments in an area that could sprout thousands of additional multifamily housing units in the next few years.
The Southern California-based developer is one of several companies dusting off plans for housing in a transit-friendly section of Milpitas as vacancy dips and rents rise. City officials say about 2,440 townhomes, condos and apartments have been approved so far in two areas long targeted for higher-density growth.
“There was a lot of interest in the area in 2008 and earlier, and then the economy went south,” Milpitas senior planner Sheldon AhSing said. “Now developers feel the market’s hot, and they want to get in.”
Shea closed on the $7.75 million deal at 1201 S. Main St. last month, said Melvin Harrison, an associate vice president at Cassidy Turley who represented the seller, Willow Road Investors LLC. Brokers from CBRE were also involved in the deal.
“There’s a pent-up demand,” Harrison said. “People have been foreclosed on, younger people are moving into the housing market. And we have a real active job market right now.”
Over the next 15 to 20 years, the city wants to see 11,000 units fill the city’s Transit Area and Midtown specific plans, which were adopted in 2008, said Felix Reliford, acting planning and neighborhood services director.
The area is ripe for this type of dense development because it’s served by the Milpitas Great Mall VTA station and is on the planned extension of Bay Area Rapid Transit, officials said. Site work at the future BART station at Montague Expressway and Capitol Avenue started in August. By 2030, it’s expected to see 20,000 daily passengers, according to BART.
“We’re trying to get people out of their cars and using mass transit,” Reliford said.
Sean McEachern, development manager for Aliso Viejo-based Shea Properties, declined to disclose the total project price tag, but said Shea has brought in Los Angeles-based The Resmark Companies as equity partner on the project. Construction should start late this year and will take up to 22 months. Rents have not yet been set, McEachern said.
Shea paid about $65 per square foot for the parcel, which is located near the VTA light-rail station and Great Mall of Milpitas. That price is “about mid market” for similar properties in the area, Harrison said.
“Milpitas attracted us really because of the job growth in San Jose,” McEachern said. “We view this as a very short distance to the core tech jobs that have been really the center of attention.”
The Milpitas location is a short distance from north San Jose, which has seen a flurry of business expansion and development recently. Cloud communications company 8×8 in May announced it was expanding to 104,657 square feet of Class A space at 2125 O’Nel Drive in North San Jose. Ellis Partners LLC is also planning to renovate and build out a 956,000-square-foot campus called 101 Tech off Orchard Parkway.
Willow Road Investors, an investment arm of San Mateo-based The Matteson Companies, originally purchased the Milpitas parcel several years ago and entitled it for 126 condos. After market conditions soured, construction never moved forward, said Jim Blake, executive vice president for The Matteson Companies.
As the market came back up, the company opted to off-load the property rather than develop on its own.
Blake declined to reveal the company’s initial purchase price, but said the recent sale amounted to a recouping of its investment. Shea then worked with Kingsmill Group LLC to re-entitle the land with more units.
“After waiting a couple years, it became attractive again at a higher density,” Blake said.
Growth in the area
The Shea project and others in the region are seeking to take advantage of a tight rental market that’s boosting rents. Vacancy in larger multifamily complexes stood at 3.4 percent in Santa Clara County in the second quarter, according to research from Cassidy Turley. That’s down from 3.7 percent at the end of the first quarter.
Meanwhile, average rents increased from $1,812 per month to $2,016 a month, an 11 percent increase.
A number of other projects are planned for the region. Citation Homes is planning 732 units in two buildings at 1200 Piper Drive as part of its Montague Village project, 638 of them rentals, Ah Sing said.
Integral Communities is working on 1,154 units, plus 87,000 square feet of retail, at McCandless Drive and Great Mall Parkway. A D.R. Horton project called Harmony will add 276 townhomes and condominiums at Montague Expressway and McCandless Drive.
Real Estate Reporter-
Silicon Valley Business Journal