Judge Rejects Motion to Halt Project HomeKey Development

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.

Grace Hase is a staff writer for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @grace_hase. Or, click here to sign up for text updates about what she’s working on.

12 Comments

  1. > they plan “to move forward with the apartment development and create an asset that the city and people of Milpitas will be proud of.”

    Why would the people of Milpitas be proud of an obscenely overpriced, certain-to-be-decrepit warehouse full of bums from all over the western half of the continent?

  2. Unless Superior Court Judge Patricia Lucas resides near a homeless shelter or large encampment she should’ve been challenged on her qualifications to rule on the case. The public needs to strike back at, or at least expose, the elitists who “rule” that we should live and raise our children among the very people (the filthy homeless, the house-arrested, the illegal aliens) for whom they seem to have such endless compassion.

  3. Before I met you I had a successful business that helped others. After you cut me off from my kids, I lost everything. Then my support obligation went so high that I only had $300 a month to live off of.

    I have had to quit several jobs due to the harassment. Although I have a master’s degree, you are making it virtually impossible to not be homeless.

  4. The current location 1000 Hillview Court, Milpitas “Extended Stay America Hotel” was sold for $14 million dollars at 4/14/2020, now Santa Clara County bought it for $65 millions dollars. Which means the County over paid $50 million dollars. With this $50 million dollars, how much condos can be bought for unhoused families? Why no reporters try to watch how the government spends the tax money. Is there any Collusion between officials and businessmen?

    • Hi Jessica, if you re-read the story it clearly states that it was not sold in April. It was an internal corporate transfer, so the land, because of Prop 13, has not been assessed in over a decade. That $14 million does not reflect fair market value price.

  5. Hi Jessica, if you re-read the story it clearly states that it was not sold in April. It was an internal corporate transfer, so the land, because of Prop 13, has not been assessed in over a decade. That $14 million does not reflect fair market value price.

  6. Why has SJI changed it’s comment section to prevent commenters from responding directly to other specific comments?
    Grace can.
    Jennifer can.
    But the stupid civilians can’t.

  7. Definitely something very shady here. Great work Suraj and team. How could this old run down hotel be worth $65M. Just few months ago, there was a proposal down the street to build a brand new hotel for just $25M. Really hope those people be caught. Again, for $85M project, we can house thousands not just 130 ppl at somewhere cheaper.

  8. — 146 rooms Extended Stay America Sold for $65 millions dollars to the County for the HomeKey
    — 53 rooms hotel on the Main Street Milpitas is listing for sale $14.9 millions dollars (check realtor.com)
    For people who know how to count/calculate, tell me how much is Extended Stay America has been over priced? Why the County willing to over paid $20 millions dollars for this hotel?

    It is our hard working taxpayers’ money….

  9. Hi Grace, $65 million dollars does not reflect fair market value price either. (I wish my house price can hike like this :). The Government should use our tax money wisely. It is our hard-earned money.

  10. What is the “market” in play here? $65 million investment for what use and whose benefit? Very, very accommodating market for investors in hotel real estate. But for people who pay taxes and people who must pay for housing but also live within their means, this deal looks like one more example of “privatize the profits, socialize the costs”.

    No cruel or shaming comments about our unhoused neighbors. Give it a week, a month, a year, they could be any of us.

  11. Jessica, nice reporting.

    It amazes me how these huge numbers are thrown around on these projects and no one does simple math on them. These really are barely studios, maybe a kitchenette. The homeless shelters they built recently run about $600K for 270 sqft. Now perhaps the homeless shelters need some office space for compliance and other storage/rooms for services. But as other articles in this new outlet attest, those services rarely work and do not serve the tenants well, perhaps pad the NGO budgets instead.

    These look to be about $445K a door, so “buying” seems to be an improvement on “building”. But I would gather that “retrofitting” this property will cost more than $150K a door to make it a sanctioned homeless housing project. And that will likely go over budget, so expect $700K-$800K a door.

    For reference, I purchased a 30 unit in Washington state, built in 2004, (16x2BD, 14x1BD, full kitchens w dishwashers, and per unit water heaters) for $50K a door in 2018. We have kept many at risk off the street with that one just fine, and only a few need “out-patient” social work. There is no doubt in my mind there are other such buildings in CA, a lot of CA is broke. And you could house 12 homeless for the price of one in the Bay Area.

    Another proof point, the building we sold in San Jose to buy that WA property sold for $325K/door (1BD w individual water heater and washer dryer stackable in each unit) in 2018, now I wish I sold it to the city for $600K. I guess its all about who you know.

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