Downtown San Jose housing tower moves ahead, lands construction loan

SAN JOSE — A new residential tower with hundreds of units could sprout at one of the gateways to downtown San Jose now that the project’s developer has landed the construction loan the company needs to build the highrise.

The Garden Gate Tower at 600 S. First St. in downtown San Jose’s SoFA district has obtained crucial construction financing, according to documents filed with the Santa Clara County Recorder’s Office.

Boston-based Scape North America, a developer that is a unit of London-based Scape, has landed up to $182 million in construction funding for the San Jose tower, the property records reviewed by this news organization show.

“Scape’s Garden Gate tower will anchor the southern gateway for downtown heading into the SoFA District,” said Scott Knies, executive director with the San Jose Downtown Association.

The project is being built on a 0.4-acre site at South First Street and East Reed Street in the SoFA neighborhood, a bustling district of restaurants, nightclubs, cocktail lounges, entertainment hubs and live-performance theaters.

New York City-based Madison Realty Capital, a private equity fund, provided the building loan for Scape North America’s affiliate, according to the county documents.

Scape intends to build a 23-story tower with 336 residential units, documents filed with San Jose city planners show.

This final version of the Garden Gate Tower was redesigned to envision a shorter building than the original proposal for 27 stories.

“It looks like the redesign made the project financially viable,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy. “The construction loan is proof of that.”

Instead of 290 units, the highrise will contain 46 more units than first planned.

“While additional units are proposed, the reduction in the number of stories would result in smaller units than previously proposed,” a city planning document posted earlier this year states.

Scape specializes in student housing but also has built market-rate residences in some areas, including Boston.

Some experts believe that lenders these days tend to be picky about which building projects they finance.

Uncertainties linger over the office market because of major unknowns such as the pace at which companies will return to the office in the wake of the COVID outbreak.

Plus, numerous companies continue to exit offices and put the spaces up for sublease as they attempt to determine how many of their employees might work from home.

What is far more clear, however, is the demand for housing.

“There is no question that housing is needed,” said Mark Ritchie, president of Ritchie Commercial, a real estate firm. “You are seeing construction financing for housing.”

The Garden Gate Tower is expected to include several amenities, according to C2K Architecture, the highrise’s designer.

The project will feature a rooftop terrace and will include on-site amenities such as a swimming pool, resident lounges, fitness spaces and a below-grade, 230-stall parking garage,” C2K stated on a post on its website.

Overall, plenty of cash is available for choice development ventures, Ritchie opined.

“There’s a tremendous amount of money out there to finance construction projects,” Ritchie said.

The Bay Area and Silicon Valley are both deemed to be choice investment spots for lenders that are seeking to finance commercial and residential projects, according to Ritchie.

“Lenders are especially interested in the Bay Area, and particularly in San Jose,” Ritchie said. “San Jose is considered to be under-developed.”

Full article by George Avalos: https://www.mercurynews.com/2021/11/18/downtown-san-jose-home-tower-construct-loan-develop-real-estate/