The final buildout of Communications Hill, one of the largest and longest-running master-planned development projects in San Jose, is finally coming into view.
KB Home last week closed on a 9.8-acre chunk of land that will form the start of the massive project’s next phase — 154 units that will be joined by many hundreds more over the next 10 years. The first model homes, a mix of townhomes and small-lot single-family units, are expected to start construction this fall.
The deal is a major inflection point in the 35-year history of the Communications Hill plan, which called for up to 4,000 residential units, a 50-acre industrial park, a small retail center and wide swath of open space on the 400-foot-high hill. Public records show KB paid about $19.15 million for the site, or roughly $124,000 per unit.
“This was a huge milestone,” said Rob Bettencourt, general partner of MTA Properties, the family trust that owns most of the land on Communications Hill.
Backstory
Communications Hill is one of a handful of large, master-planned Silicon Valley development sites in infill locations that are finally getting built out as strong home prices tempt capital to place bets on these often complicated, pricey projects. Others include Wilson Meany and Stockbridge Capital’s Bay Meadows in San Mateo, on a former racetrack; KB Home on the San Jose Flea Market site near the under-construction Berryessa BART station; and Lennar Corp. on a 111-acre site next to the Warm Springs BART station in Fremont, also coming soon.
Communications Hill isn’t a redevelopment — the remaining land has been largely untouched since Manuel T. Azevedo arrived from Portugal basically penniless, bought a cow, and started the American Dairy Co. Cows grazed the property while a creamery in downtown San Jose processed the milk. (Now the hill sprouts microwave towers on its summit, visible from miles around on the valley floor.)
The Bettencourt family, descendants of Azevedo, has been working with the city of San Jose since the 1980s on the hill’s development, but construction didn’t start until the early 2000s. That’s when KB Home erected Tuscany Hills, a 760-unit project. SummerHill Homes later built about 400 homes on adjacent Dairy Hill.
The work stopped during the Great Recession, but KB never lost interest. It went back into contract on the land as the economy recovered, and received final approvals for the buildout plan last year that includes about 2,000 units.
The plan now is for KB to build all of those units, closing on development sites each year for the next 10 years. The phasing allows KB to lay in the infrastructure with each new chunk — a huge investment given the high costs of building on the hill.
“What KB was able to do is take that infrastructure and break it into phases,” Bettencourt said. “That made it a lot more attractive.”
Next steps
The next phase will start across from Adeline Avenue near Manuel Street and essentially extend the existing street network out. As KB sells out of the first 154 units, KB Home will start working on the next phase, which will be about 160 units.
“We are very excited to have closed on the initial phase of our Communications Hill community in San Jose,” Chris Apostolopoulos, president and regional general manager for KB Home Northern California said in a statement.
Apostolopoulos said crews would begin grading at the site in the next few weeks and start construction of model homes this coming fall.
“We plan to hold a grand opening for the community in early 2016 and anticipate the first homeowners will move in next summer,” he said.
Unique project
Among large suburban projects, Communications Hill is considered somewhat progressive, drawing its inspiration from San Francisco’s Telegraph Hill. Features include a rectilinear street grid and stairs that are sometimes too popular with visitors.
The new buildout plan will include attached townhomes, small-lot single-family homes and several taller stacked-flat buildings, some rising up to six stories. Design, from architecture firm KTGY, will transition from traditional Mediterranean-style aesthetic to very contemporary looks (see slideshow).
KB isn’t slated to acquire two significant pieces of the hill — a 55-acre site zoned for up to 1.4 million square feet of industrial space, and a 60,000-square-foot village center project. MTA will retain ownership of those locations, though KB Home will install all the infrastructure to make them viable, a major commitment. ( Read more about the industrial opportunity site here.)
Jerry Strangis, MTA’s longtime real estate agent, told me in an email it felt “great” to close a deal he’s been working on for 35 years. (His license plate actually references the hill.)
“The partnership with the city is the most gratifying part,” said Strangis, who heads up Strangis Properties. “The biggest challenge has and always has been the infrastructure improvements and how to phase it. That's were the city has been the most help.”
For Bettencourt, the sales and roadmap are both the culmination of years of work and perhaps a bit bittersweet.
“The property’s been in our family for four generations,” he said. “We’re always going to be attached to it.”
Source: Silicon Valley Business Journal, Nathan Donato-Weinstein
http://www.bizjournals.com/sanjose/news/2015/05/05/exclusive-kb-home-snaps-up-first-piece-of-huge-san.html
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