SAN JOSE — A site tapped for a big residential complex that stalled due to the struggles of its original builder has been bought by a real estate alliance led by global developer Westbank and local developer Gary Dillabough.
Westbank and Dillabough have teamed up to buy a roughly 1.6-acre site near the corner of Terraine Street and Bassett Street where China-based developer Z & L Properties had proposed hundreds of residential units, according to public documents filed on May 25 in Santa Clara County.
The group led by Westbank and Dillabough’s Urban Community firm paid $11.4 million for the property, according to county documents.
Z & L Properties, which has a Foster City office, intended to build 305 residential units on the site along with ground-floor retail, near one of the gateways into downtown San Jose.
But the project never got off the ground in any meaningful way and in April 2019, Z & L stumbled into a default on its development agreement with the city of San Jose to proceed with the residential project.
The collapse of the deal with Z & L forced San Jose to cast about for a new developer to complete the project.
Terrascape, a real estate firm headed by development veterans Tony Arreola and Mark Lazzarini, came to the project’s rescue and kept the housing plan alive by striking a deal to purchase the site from Z & L Properties.
“We put it under contract in July 2019 after the city directed Z & L to see if they could work with us to put a deal together,” Lazzarini said. “Z & L was looking to reposition some of its assets.”
The Terrascape-led effort was successful in keeping the project viable.
“We put a deal together where we could move forward,” Lazzarini said.
The Terrascape developers have now transferred their purchase agreement to the Westbank and Dillabough venture, which has completed the purchase of the vacant lot where the housing development is proposed.
In February 2020, Canada-based Westbank entered the downtown San Jose market after the mega-developer formed an alliance with Dillaough’s Urban Community, gaining ownership stakes in several properties in the urban core of the Bay Area’s largest city.
Through a string of transactions valued at $184 million, Westbank and Urban Community took joint ownership in 2020 of the Bank of Italy office tower, the Museum Place site, the Valley Title property, the site of the now-shuttered Bo Town Restaurant, a big surface parking lot along Fountain Alley behind the Bank of Italy building, and the Davidson office building.
The Davidson office building is adjacent to the vacant lot that Westbank and Dillabough’s Urban Community bought from Z & L Properties. Westbank and Dillabough are planning a new office and retail tower that would connect via a sky bridge with the existing Davidson building, which will be preserved. Westbank is calling the new office development The Arbor.
And that means a new housing project could have plenty of synergy with the office complex since homes would be built next door to office jobs.
Lazzarini believes the involvement of Westbank and Dillabough in a widening number of projects bodes well for downtown San Jose.
“We are thrilled, we are absolutely thrilled that Westbank has made such a major commitment to downtown San Jose,” Lazzarini said. “Westbank has the wherewithal, the capacity, and the capability to get these projects done.”