The future home of the South Bay’s first Blue Bottle coffee shop in downtown San Jose sold this month, but the property's new owner — the venerable developer Jay Paul Co. — says there’s no reason to fret: the popular third-wave coffee shop is still set to open in the space.
Jay Paul Co. purchased the four-story building at 1 North First St. in downtown San Jose earlier this month for $46 million, or about $455 per square foot for the approximately 101,000-square-foot building, on the heels of another massive downtown purchase.
The North First Street property, which is more than 70 years old, has been reimagined repeatedly as it has traded hands, so confirmation that Jay Paul is staying the course is valuable insight.
The building served as a J.C. Penney’s department store for the first three decades of its life. Later, it was a well-leased office building filled with popular tenants like the Lincoln Law School. But the aging structure fell out of favor with office tenants in the early 2000s and struggled to keep its four floors full.
For a time, one investor imagined the property at the corner of First and Santa Clara streets as a residential rehab, past Business Journal reporting shows.
In 2016, Lift Partners and Westbrook Realty Management purchased the property for about $16 million and embarked on an ambitious plan to restore the old office building to make it attractive to creative tenants.
“Basically the only thing that won’t be new [in the building] will be all of the great pieces that you want to keep, which are the floors and the old steel and the board-formed concrete on the inside,” Chris Freise, a partner with Lift Partners told the Business Journal at the time.
The partnership secured the South Bay’s first ever Blue Bottle coffee shop slated to open in the ground floor — an announcement that caused plenty of fanfare last year when the Business Journal broke the news.
Now, the newest sale to prolific San Francisco developer Jay Paul, which has leased buildings across the Bay Area to some of the biggest tech titans in the Valley, appears to be continuing with those plans, but the transaction may launch the property on a new trajectory.
“Just given the profound extent of [Jay Paul's] tenant base and presumed relationships, I think when he moves, he is moving with some of these tenants in mind,” Mark Ritchie, president of San Jose-based Ritchie Commercial, said in an interview late last week. “That seems to be his M.O., and the fact that he struck so fast and so deep [in San Jose] tells me that they’ve got to be doing it with some of these tenants at his side.”
Industry insiders say that beyond the Blue Bottle, no other leases have been made public for the property so far.
Baristas make pour-over coffees at a Blue Bottle Coffee shop in Washington, D.C.'s Georgetown neighborhood. The popular third-wave coffee chain is based in Oakland, where it was founded.
But finding quality tenants hasn’t traditionally been a problem for Jay Paul, and company officials told the Business Journal last week that San Jose was a “natural extension” of the developer’s growth strategy.
“We feel that San Jose is ripe for investment and development,” Matt Lituchy, chief investment officer for Jay Paul Co., said last week. “It has all the qualities that tenants are looking for: It is a vibrant and urban environment with transit.”
The purchase at 1 North First St. comes weeks after Jay Paul Co. purchased CityView Plaza, a block-sized mixed-use office and retail campus in the heart of downtown San Jose, for a whopping $283.5 million.
That property had been owned by Equus Capital Partners for more than a decade. Prior to the sale, Equus was also shepherding through city hall a proposal for a new 24-story residential and retail tower that could rise on the corner of the 11-acre property, a prospect that could increase the site’s value to a savvy developer.
Now, real estate insiders are buzzing with curiosity about what the prolific developer will do with its new trappings in San Jose — and whether more purchases are on the way.
Meanwhile, the San Jose deals come on the heels of Jay Paul Co. leasing 1 million square feet of office space to Facebook in Sunnyvale in the year’s largest deal so far.
The company also leased hundreds of thousands of square feet to Amazon in the same still-under-construction Moffett Park complex known as Moffett Towers II. Jay Paul has worked with Newmark Knight Frank Executive Vice Chairman Phil Mahoney to lease its Moffett Park developments, which have been taken up by giants like Facebook, Amazon, Google and Microsoft.
“Jay Paul, to me, he is the Keyser Soze of the development world,” Ritchie joked in an interview on the San Jose purchases late last week. “He’s this man of mystery, but I don’t know that anybody has done anything at the scale that he done; it is just remarkable.”