Landlords to Convert First-Floor Retail to Homes in San Jose

It’s nearly a given that the ground floor of an urban apartment building has shops and restaurants. Now a pair of Downtown San Jose landlords want to turn their bottom floor into homes.

Archway Equities and Virtú Investments have filed plans to convert the street-level storefronts at The James apartments into nine or 10 residential units at 98 North First Street, the San Jose Mercury News reported.

The Beverly Hills- and Larkspur-based investors bought the 190-unit, six-story luxury apartment building, built in 2019, in September for $74.3 million, or $391,000 per unit.

Amenities include a pool and spa, fitness center, co-working area, social lounge and a pet spa and dog washing station, according to its website.

Rents at the 160,000-square-foot complex at First and East St. John streets range between $2,474 to $6,520 a month, according to Apartments.com.

The James also came with 10,800 square feet of ground-floor space for offices, shops or restaurants — which are now vacant, according to the Mercury News.

The empty offices in San Jose, coupled with waning hotel occupancy, have meant less foot traffic in Downtown.

And that presents a challenge for local retail businesses, according to the Mercury News. The vacancies have pushed owners of commercial real estate to scout for ways to make their buildings more valuable, as well as pay their bills.

Along that line, Archway and Virtú have put forth two proposals to convert the curbside storefronts beneath The James’ apartments into homes.

One would pack the floor with 10 studio apartments; upstairs, such units contain 575 square feet.

Another proposal would redevelop the retail slots into eight studios and a one-bedroom apartment, which upstairs measures less than 1,200 square feet, according to Apartments.com.

Archway Equities, founded in 1974 by Alex Moghavem, owns 17 apartment complexes and four office properties, with about $1 billion in assets under management, according to its website. They include 5,000 units in such cities as Dallas, Austin, Raleigh, Nashville and Atlanta.

In May, Archway bought a 385-unit luxury apartment complex in Montclair for $150 million, or $389,610 per unit, among the largest multifamily deals last year in Southern California.

Since its founding in 1997, Virtú has bought and managed more than 130 properties, totaling more than 24,000 units and more than $3.7 billion in value, according to its website.

In January, Virtú bought a 50-unit apartment building through a contribution fund at 612 Mariposa Avenue in Oakland for $10.6 million, or $212,000 per unit.

— Dana Bartholomew