A Santa Clara County judge has denied a temporary restraining order filed by a group of Milpitas residents looking to halt the planned conversion of a hotel into long-term supportive housing for homeless people.
Two months ago, the state gave Santa Clara County nearly $30 million as part of a program called Project HomeKey, which gives financial aid to local governments to rehabilitate hotels, motels, vacant apartments and residential care facilities into housing for those with nowhere else to call home.
In Milpitas, those dollars are slated to transform a 146-room Extended Stay America at 1000 Hillview Court into 132 apartments.
But the project was met with resistance from the start.
In mid-October, the Milpitas City Council briefly considered suing the county, developer Jamboree Housing Corporation and the state over what they said was a lack of transparency and a hasty timeline. After the council opted not to pursue litigation, some residents decided to take matters into their own hands.
Last week, Voices of Milpitas LLC—a group created by former Mayor Jose Esteves—filed a lawsuit arguing that the hotel conversion would be “devastating to nearby communities” and create problems with public safety and sanitation, among other things.
The group also took issue with the project’s timeline and cost, calling it “massive government overreach and overspending.” The county originally needed to close the sale of the hotel by Dec. 29, or else it would forfeit the funds. However, the closing date was recently moved up to this week.
“This effort to accelerate this highly controversial purchase reveals the county and Jamboree’s disregard for the community that will be affected by this proposed project,” the group said in the lawsuit.
In a phone interview, Suraj Viswanathan, one of the residents leading the legal challenge, said the lawsuit is “nothing against homeless people, or anything like that—it’s having the right to say what is coming into our city and not.”
In response to the lawsuit, Ray Bramson, the chief operating officer of nonprofit Destination: Home said that it’s imperative to take advantage of an opportunity like this.
“At the end of the day, housing is a right for people and we need to make sure we’re taking care of everyone in our community equally,” he said. “We can’t afford opportunities like this to slip away. ... It’s our responsibility to make sure we move important developments like this forward.”
During the Monday hearing, Viswanathan and the other plaintiffs argued that the developer is using taxpayer’s money to buy the property at an unreasonable price.
“Upon information and belief, the estimated $80 million price tag for the Hillview Court greatly exceeds the fair market value of this property and the costs of the proposed alterations to the property,” the lawsuit stated. “The county proposes to acquire the property for $65 million, despite the property having an assessed value of $14 million earlier this year. There will be no ‘new construction’ expenses and only about $3 million in rehabilitation costs because the property is ‘move-in ready.’”
Attached to the lawsuit was an assessment from the property data website ParcelQuest, which said the land was last assessed in 2020 for $13.8 million. The same document also states the property was last sold in April for $14 million.
However, according to David Ginsborg, deputy to Santa Clara County Assessor Larry Stone, the assessed value—which he said is actually $13.2 million—was based on the last transfer of the property in October 2010. Under Proposition 13, a property is only assessed when there is a change in ownership or new construction. And the assessed value often doesn’t reflect the fair market value of a property.
As for the recent sale, county Office of Supportive Housing Director Consuelo Hernandez said “the April transfer was an internal corporate clarification on the owning entity.”
Viswanathan claims there are additional issues with how the appraisal price was calculated. The appraisal, which came at the bequest of Jamboree, was done back in March by Southern California-based Cressner & Associates and was recently reviewed by the county. At the time of the appraisal, Jamboree was in escrow to purchase the property from ESA Portfolio for $65 million—the same valuation issued a month later.
Viswanathan said the appraisal price also doesn’t take into account the impact the pandemic has had on hotels and the real estate market.
“Covid-19 and its effect on the price [were] never considered for the price valuation, although Covid-19 was already in full swing at the time of this appraisal and should significantly reduce the value of the property,” Viswanathan said.
For other parts of the appraisal, the Voices of Milpitas representative argues that Cressner & Associates “artificially inflated” the hotel’s income, which he said should make the property worth $41.6 million.
After reviewing the appraisal for himself, Bob Staedler, a principal at land-use consultancy Silicon Valley Synergy, said he understands “the community’s concerns.”
“I think there are legitimate questions to be asked,” he said.
According to Viswanathan, Santa Clara County Superior Court Judge Patricia Lucas asked Voices of Milpitas on Monday to come back for another temporary restraining order hearing in early December after they’ve obtained their own appraisal.
“I’m feeling hopeful because this is not going to go anywhere,” Viswanathan said. “We’re not going to let this go. We have already invested $50,000 for this and whatever this takes we’re going to go full fledge on this.”
Roger Kinoshita, the senior director at Jamboree says that pending the decision of the next hearing, they plan “to move forward with the apartment development and create an asset that the city and people of Milpitas will be proud of.”
Santa Clara County Counsel James Williams and County Executive Jeff Smith could not immediately be reached for comment.