After years in limbo, Museum Place project may finally sprout in downtown San Jose

San Jose officials have been working to get a 1 million-square-foot tower and expansion to the Tech Museum out of the ground in downtown for years with several false starts. An approval this week may finally be the ticket that gets it moving.

San Jose councilmembers Tuesday approved a development and lease agreement with prolific downtown developer Gary Dillabough to finalize changes he’d proposed for the project, known as Museum Place. He intends to build a 20-story tower with 928,000 square feet of office space, 60,000 square feet of Tech Museum expansion space, about 8,400 square feet of retail and 482 new parking spaces.

“I understand that the city has been left at the altar numerous times on projects in this area,” Dillabough told councilmembers Tuesday. “Our goal is to get this moving as quickly as we can … We are just kind of chomping at the bit and waiting for this agreement to get done.”

Indeed, Dillabough is the the second developer in recent years to try to redevelop the 2.3-acre site at 180 Park Ave., where Parkside Hall currently sits. In 2017 King Wah, a group associated with Insight Realty, had planned a building that would include a little bit of everything: hotel, office, residential and retail.

As the project stalled last year, Dillabough paid a $1 million deposit to take over and keep the development agreement alive. He immediately started making plans to simplify the project, removing the residential and hotel space in favor of more office.

The change was important, not just for attracting investors, but because it’s hard to have so many uses in a single building and do all of them well, Dillabough said in an interview last year with the Silicon Valley Business Journal.

“One thing that we are making sure of as we are going through the design process is really spending time with tech tenants to make sure we understand their needs,” Dillabough said Tuesday. “This building has a lot of the characteristics … that we believe will attract one of those tenants to this facility.”

San Jose Mayor Sam Liccardo praised the developer’s work in the city Tuesday.

“This is a very complex project and I know you’ve been at it for a very long time,” he said. However, Liccardo noted he had concerns about some conditions in the agreement that would allow the project to be placed on hold if the economy experiences negative growth for two consecutive quarters in a row.

“I’d be willing to bet my paycheck there is going to be a recession. There is going to a recession during this construction period,” he said. “So my problem is if we’ve got a provision in a contract that says the other party has an out if something happens that we are virtually certain is going to happen, then we are all in trouble.”

Currently, Dillabough has multiple projects in planning throughout downtown San Jose, after spending the last three years buying up more than 20 properties, spending nearly $300 million on them. But he’s working with various development partners to get those projects out of the ground, investments he estimates will take another $3 billion to $4 billion in investment.

For Museum Place, he’s brought Vancouver-based developer Westbank, which was no small feat, Dillabough said.

“They only operate in four cities effectively in the world right now: Tokyo, Toronto, Vancouver and Seattle,” he said. “I’ve been working with them for nine months to try to convince them that San Jose was the next place they should plant a flag.”

The project is expected to break ground in 2020.

Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.