San Jose moves forward with Insight Realty for downtown tower deal

by Nathan Donato-Weinstein
Silicon Valley Business Journal

Drive down Park Avenue in downtown San Jose, and you might miss Parkside Hall if you so much as blink.

But the aging exhibit space for The Tech museum could be transformed into a sleek mixed-use tower if all goes well between the city and a Chinese-backed real estate developer with an ambitious vision — and, city officials hope, rock-solid financial support.

The San Jose City Council on Tuesday formally agreed to enter into talks with Insight King Wah, a joint venture of Insight Realty and King Wah Development, to acquire the city-owned site. The partnership is being backed in the deal by China New Era, a global real estate investor, for the $250 million project.

“There’s a vibe that this may be one of the best developments that our downtown has seen,” said downtown councilman Raul Peralez. “I’m really excited about this project and what it could mean for downtown, our city and for The Tech.”

The unanimous vote was largely expected after city staff in August recommended the Insight proposal from four hopefuls: Insight, Build Inc., Simeon, and a group called 180 Park Avenue LLC. I wrote about that selectionhere.

Insight is proposing replacing the building at 180 Park Avenue with a 270-foot-tall tower. It would include 210,000 square feet of office on five floors; 185 residential units on 12 floors; two stories for a nationally branded boutique hotel; and “luxury penthouse residences“ up to 11,300 square feet on the top floor.

The city would contribute the land and Insight would agree to build a new, expanded exhibit space for The Tech as part of the building.

Mayor Sam Liccardo was largely supportive of the project at Tuesday’s council meeting, but asked for assurances that the Insight venture could pull off such an ambitious project.

“In basketball parlance, we’d call this a quadruple bank shot,” Liccardo said. “You’re trying to make residential, office, hotel, retail work, plus space for The Tech. Undoubtedly, you’ve heard critics say you can’t finance it. … So my question is, can you finance it?”

Dennis Randall, a managing partner for San Jose-based Insight, answered in the affirmative.

“Raising capital for a project like this, in a town like San Jose, is, I don’t think, a problem anymore,” he said.

Randall said that capital used to be focused on specific asset classes — such as office-only or retail-only projects — but that’s changing. In any event, the joint venture already has a committed financial partner in China New Era.

As part of the agreement to enter into negotiations with the city, Insight agreed to a “labor peace agreement” in which the future hotel operator would agree not to resist a union’s organizing attempts.

The next step is to work through the financial terms of a deal. Officials hope to bring a purchase and sale agreement to the council for approval within six months.

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