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We’ve spent the past few years turning Downtown San Jose’s first movie theater into one of the area’s coolest new office and retail spaces, called Paseo. Much of that work has involved demolishing the site’s auditoriums, bringing its heating and cooling systems up to code, and adding windows to a formerly windowless building. Paseo’s outsides now resemble its architectural renderings, meaning construction is getting close to wrapping up. We're working towards completing the shell of the project's second and third-floor offices in September.
Although work is winding down on Paseo’s exterior, its interior — specifically its ground-floor retail area — is abuzz with construction activity. The sound of construction work is already audible on the ground floor; Urban Putt began building out its space in Paseo last quarter, and we’re finishing up construction of our portion of Eos & Nyx’s space before turning it over to them. Urban Putt, which operates a mini-golf course, full-service restaurant, and bar under one roof, aims to open for business in October. Eos & Nyx, a restaurant offering brunch, lunch, dinner, and cocktails, plans to start building out its space once we turn it over to them later this month — putting it on track to open in the first half of 2024.
A look inside Paseo's under-construction retail area, which includes mezzanine levels. Photo taken June 2023.
Unofficial Logging, Downtown San Jose’s second axe-throwing venue, expects to receive a building permit and start construction in the coming weeks, putting it on course to open during the first half of 2024. Meantime, we continue negotiating with a national retailer for Paseo’s last remaining retail space.
As Paseo’s retail tenants progress toward an opening, we’re making headway on the rest of our Downtown San Jose Opportunity Zone development project portfolio. That includes the site of our hotel, whose first floor will soon be visible to those traveling by the project, and our 272-unit Aquino development, which now has a targeted groundbreaking date.
Keystone: We began constructing our 176-key extended-stay hotel in February, and construction is proceeding as planned. We've poured the project's concrete foundation and erected an on-site tower crane. Keystone's first floor will soon be visible to those traveling by the project site.
Our crane at Keystone has now gone vertical and is too high for our webcam to see!
Gifford Place: We're "shovel-ready" on our 169-unit senior living development after demolishing the project site last year. We're in talks with potential private equity partners as we build the capital stack to finance construction.
Aquino (formerly TMBR): Similar to Gifford Place, we're speaking with construction lenders and equity groups as we build the capital stack to finance construction. We aim to begin constructing this 272-unit multifamily complex in the summer of 2024.
The Mark: We have strong interest from major student housing equity partners on our 850-bed student housing project. Our development team recently toured The Grad, San Jose's largest existing student housing project, and several smaller projects near San Jose State University. The Grad is leasing well for the upcoming school year, and its occupancy rate is on track to exceed 95 percent by August. That occupancy level signals to the market that more student housing is needed to satisfy demand.
Icon: We're in the final stages of closing escrow on the last parcel needed to complete this 500,000-square-foot office project's land assemblage. We expect to close escrow by the end of the quarter. Due to the challenging office market, we're studying the feasibility of changing Icon to a multifamily project. We will keep you updated on Icon's status as we model out options.
Echo: The City of San Jose recently approved a redesign of the 388-unit apartment tower's exterior, which will allow us to increase its energy efficiency. As we progress toward a building permit submittal, our capital markets team is talking to several potential financial partners interested in helping us take Echo vertical.
Fountain Alley Building: We’ve obtained building permits and agreed to multiple easements with a neighboring property owner, paving the way for us to construct and operate this project. This six-story development combines 75,000 square feet of offices with ground-floor and rooftop retail and restaurant space. Our development and capital markets teams are waiting for the office financing markets to become more favorable before we procure a construction loan and break ground.
Click here to learn more about how to invest in several of our Opportunity Zone projects through our Fund II.
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer").
All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM.
With respect to any performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. Assumptions are more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment.
These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.
Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Real Estate Risk Disclosure:
- There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
- Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
- Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- Potential for foreclosure – All financed real estate investments have potential for foreclosure;
- Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
- Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
- Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures
- Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.
- Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.
- Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.
- Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.
- Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.
- Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.
- Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.
The above material cannot be altered, revised, and/or modified without the express written consent of Urban Catalyst.
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