Related Articles Diridon project may be next hot spot in downtown San Jose

SAN JOSE — City leaders on Tuesday are expected to settle a lawsuit brought by the San Jose Sharks’ parent company over city approval of a big office and retail tower that would eat up 835 parking spaces near the hockey team’s arena.

The team’s parent company, Sharks Sports & Entertainment, filed suit in June against San Jose and developer Trammell Crow Co. to stop the massive new project near the Diridon transit station. The project would create 1 million square feet of office space, retail and 325 apartments in a 10-story building on a parking lot near the SAP Center off Delmas Avenue.

Trammell Crow and a partner last year paid $58.5 million for the 8.3-acre site with the goal of developing a high-tech campus. It’s the largest private investment in downtown San Jose’s history.

But the lawsuit from Sharks Sports & Entertainment claimed the city rushed approval of the project without fully studying the environmental impacts of a large development in the city’s downtown core. Rather than battle it out in court, City Attorney Rick Doyle is recommending a settlement, which the City Council is expected to approve Tuesday.

The settlement includes a $4 million payment from Trammell Crow to the city. San Jose would use that money to acquire certain properties to the north of the SAP Center for public parking. It’s unclear how many new spaces would be provided.

“The city will make good faith efforts to purchase these properties with the provided funds,” Doyle wrote in a memo. “If the city is able to acquire all the properties, the city will also lease certain adjoining (Sharks Sports & Entertainment) properties for $1 /month and construct a surface parking lot that will be operated by SSE for the purposes of public parking.”

Doyle confirmed Monday that the planned acquisition of nearby properties will not replace all 835 of the parking spots that would be lost.

“There will be further discussions down the road on other needs, but this is a good start,” he said. “This will allow us to address the parking issue and it’s something we’ve contemplated for a while. BART is coming down there and there’s a lot of future development happening.”

As part of the settlement, Sharks Sports & Entertainment will give San Jose an option to purchase the properties if the city constructs a parking garage or upon termination of its Arena Management Agreement. “The city will also make efforts to secure additional parking for SSE employee parking,” Doyle wrote.

Cynthia Langhorst, a Trammell Crow spokeswoman, said final details are still being worked out, but “there is substantial agreement amongst the parties.”

Bernard Vogel, III, CEO of the Silicon Valley Law Group, which represents Sharks Sports & Entertainment, declined comment Monday.

But Sean Morley, who represents the Sharks’ parent company, said the group is happy the suit is being resolved so quickly and the organization “can now return its focus to operating one of the best sports and entertainment venues in the country, which remains the single biggest economic engine in downtown.”

“SSE is pleased Trammell Crow and the City are committing to improve parking opportunities close to SAP Center,” Morley said in an email. He added that the settlement also ensures that the city continues to meet its obligation to provide parking within 1/3 mile of the arena.

One longtime land use consultant said the lawsuit may have strained the relationship between San Jose and the Sharks, but the proposed settlement appears to be a good deal for the parties.

“The economic benefit to Trammell Crow is probably a tenth of what it would cost them to replace those spots,” said Bob Staedler, a principal at Silicon Valley Synergy, who estimates replacing 835 parking spots would cost nearly $40 million.

But, Staedler added, the Sharks for years have unsuccessfully tried to buy four private parcels near the SAP Center for parking and it’s possible the city might help with that effort as part of the settlement.

“It’s going to be interesting to see how involved the city will be as far as acquisition,” Staedler said. “That’s what it will come down to.”