SAN JOSE, Calif. — San Jose has elected to purchase a prime downtown property once slated for a major tech campus, which could potentially aid the city’s vision of expanding its convention center and developing a sports and entertainment district.

The City Council has approved the $13.5 million acquisition of 447 S. Almaden Blvd – a 3.56-acre parcel located between the convention center to the east and Discovery Meadow and the Children’s Discovery Museum property to the west – after BXP, formerly known as Boston Properties, put the site up for sale in the spring after abandoning its development plans.

“Securing this property will provide greater flexibility for the city as we consider a range of possibilities, including potential convention center expansion or other sports and entertainment district uses such as a flagship hotel, retail, restaurants, arts and cultural venues, or other gathering spaces,” said Kevin Ice, the city’s director of real estate.

BXP had owned the property near the banks of the Guadalupe River for decades after purchasing a group of parcels from the city’s Redevelopment Agency in 2000 for $35 million.

The property was initially developed in 1993 as a parking lot, which the city continues to lease and has proven to be a moneymaker.

A development agreement had initially required three high-rise office buildings to be built in phases before the city approved modifications in 2021 that included two connected 16-story office towers with a total of 2.05 million square feet, comprised of 1.4 million square feet of office space, 37,603 square feet of retail and amenity space and underground parking.

However, with the office market still distressed, BXP elected to put the site up for sale, which attracted a total of five bidders, including a local developer.

While the office market has stagnated, San Jose’s downtown area has shown one of the strongest rebounds among large cities in the country, thanks to a greater emphasis on the experience economy and increased activity on nights and weekends.

Along with creating entertainment zones and participating in a “stitching districts” initiative to create a more walkable and cohesive downtown, the city recently inked a new agreement with the San Jose Sharks — an essential driver of economic activity — to keep the NHL franchise in town until 2051 and renovate the SAP Center.

The city has also outlined goals for this year, including developing a concept plan for a sports and entertainment zone and studying the expansion of the convention center or the development of a high-quality hotel.

“This should have been sorted out a long time ago,” said Bob Staedler, a land-use consultant and former employee at the Redevelopment Agency. It’s good for the city to see an opportunity in a down market and the highest and best use right now is as a parking lot. I just wonder how this fits into the priorities of the city. In a time of limited resources, this needs to have an endgame that can be financed.”

To facilitate the transaction, San Jose will utilize its commercial paper program, which allows the city to issue notes for short-term borrowing. While the city’s program permits it to issue up to $175 million in notes, it had only $26 million outstanding before the acquisition of 447 S. Almaden Blvd.

The city intends to use parking revenue and convention center funds to repay the notes. Factoring in the financing costs, the total acquisition is estimated to cost $15.7 million.

The decision to complete the acquisition comes just days after a few city council members returned from a Chamber of Commerce study trip in Atlanta, where politicians and business leaders observed how they created a thriving mixed-use district around a major sports venue.

“I think one is just the power of sports, entertainment, convention-oriented districts to really drive significant economic impact of the city, and to the significant power that comes from having significant land holdings that give you the leverage to then guide the development of these districts,” District 3 Councilmember Anthony Tordillos said. “I think this is a really rare opportunity for the city to add to its land holdings in a significant way, in a very strategic area at a great price.”

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