Taking a global approach
Developer looks to innovative cities at home and abroad as he works to transform downtown San Jose
Ireached Gary Dillabough on a day he was going into contract on a new property in downtown San Jose. So what else is new with a guy who has bought up more than 30 prime properties here over the past three years? The Atherton developer and venture capitalist has big plans to transform the downtown of America’s 10th largest city to live up to its catchphrase, the Capital of Silicon Valley. But more than bricks, mortar and square feet, he and his Urban Community company have visions of a new kind of eco-friendly city that takes cues from the great cities of Europe and the U.S.
When we spoke to Dillabough more than a year ago for a story — “There’s Google, and there’s Gary” — he said his biggest concern was the cost of construction materials to complete his big projects, including restoring the historic Bank of Italy building at the intersection of Santa Clara and First streets, building a tower in the parking lot behind it and another several blocks away next to the Museum of Innovation on Park Avenue.
But what about the commercial implications of the pandemic — and the newly empowered pajama workforce? And we’re not even talking about that little contretemps with Adam Neumann, founder of Wework, who was one of Dillabough’s biggest investors until he was run out of his company last year.
Dillabough scrambled. Along with his business partner, real estate scion Jeff Arrillaga, they signed on a new partner, Westbank Corp. from Vancouver, British Columbia.
“This next phase is gonna take $3 or $4 billion to take all this vertical,” Dillabough said, “that’s what they’re there to do.”
In a chat with 57-year- old Dillabough, a former ebay vice president, he tells us what’s up. Here’s an edited- down version of the discussion.
Q Hi Gary. So how’s everything with you?
A Obviously, this COVID thing is nerve-wracking to everybody, right? But it feels like there is a little glimmer of hope now and a little better leadership. Hopefully, the vaccine is the game changer we’re looking for. But listen, I am a
little nervous about people’s perspective on California, and, I’m hoping the state and counties and cities start to recognize that the state’s got to become a little more appreciative of business and trying to figure out ways to help companies thrive here.
QWhat problems with the state of California are hindering you most?
A There’s just a lot of regulation. It takes a long time to do anything. There’s just a lot of taxes and I’m not opposed to paying more taxes. I just don’t think that the state is doing a great job of creating housing that makes sense to neighborhoods and the environment. It just feels like there’s so many little roadblocks. Q Other companies are moving to Texas. But you are heavily invested here. So how are these regulations that you’re concerned about affecting the future of your plans?
A Well, there’s just a lack of coordination. Just look at the transit situation. In the Bay Area, I forget how many different transit systems there are … when there should be one. How do we all start to put the greater good in front of us and then try to make some sacrifices, but try to get something meaningful and world class really implemented here and then look at places around the world to figure out, how do they do transportation better? How do they do housing better? Then how do we start to take it to scale? And all these frivolous lawsuits that people can bring to bear and slow things down — how do we start to take some of these projects and bring them to life more quickly?
Q Tell me how the pandemic has affected your plans for San Jose. And with all those office building projects in your portfolio, will you find tenants?
A The one thing that I think the pandemic has shown us is that we feel very efficient working from home. However, I think it’s a hollow experience. I’m getting a ton of stuff done, but now it just feels like I’m in “Groundhog Day.” It’s the same thing over and over; I don’t feel that energy and excitement I feel when around other people. And I think that’s just kind of the way that we’re wired.
The pandemic has really demonstrated to me that we have got to deliver better solutions to these companies because I believe these companies want to come back. But they want to come back to a place that really has thoughtful infrastructure and thoughtful user experiences. Places like Austin have done that. Places like Nashville are doing it, places like Seattle. But for some reason, we just can’t seem to get it right here in the Bay Area.
Q Do you think you can play any role in that, or do you feel like you’re just tilting at windmills?
A I think we can definitely play a role in it. Our partner Westbank works in cities like Tokyo and Toronto and Vancouver and Seattle. And so they’re seeing how these cities are navigating all this and how they’re improving and thriving, and I think accelerating. So we’re fortunate to have that kind of perspective. And the architects that we’re bringing into the stable of projects all have global views as well. So we’re getting not just a bunch of local perspectives, which are helpful, but we’re getting the things that are really kind of demonstrating how the world’s changed and how we can leverage those things.
Q What happened when you heard about Adam Neumann and WeWork? He was a big partner of yours.
A Adam had to divest from these properties. He gave us an opportunity to take him out and that’s why we brought in Westbank.
Q Have there been other unexpected things that have happened that have set you back?
A On a positive note, I think that our discussions and interactions with the city have been a lot more fast-paced, and we’ve got more done than we anticipated. We’re really lucky to have the city of San Jose. But there’s going to be a concern when you talk to big financing, large banking partners about Silicon Valley. When you see HPE (Hewlett Packard Enterprise) and you see Oracle leaving, their headquarters shifting, that’s certainly something that’s concerning. The city’s got to make sure that they really do create a place that’s a safe and clean environment.
Q It was more than a year ago when we talked last and you said you saw a 5- to 7-year horizon for these projects to be done. Are you on track?
A Yep. Q Can you give me a little status report? Is there one project that you’re most excited about, architecturally? And what’s the status of the others? A We’re most excited architecturally about the Bank of Italy building. We’ve got some amazing ideas for that, but for a big project, we’ve broken ground on what used to be Museum Place and now we call it Park Habitat. That’s going to be over a million square feet. I think the design is amazing. Kengo Kuma is our architect. He’s from Tokyo. He’s one of the top two or three architects in the world. We’re excited about collaboration there with The Tech (Museum of Innovation). The Tech has a brand-new executive director, Katrina Stevens. She’s awesome.
We’re excited about how we can make these two projects come together and create a special place for the city. In the very front of the building, we’re carving out 13,000 feet for a sunken garden. Most guys would just make that a glassed-in space you can charge rent on. We’re not. We wanna make sure it’s really open to the public realm. And I think the design is just stunning. The real goal there was to say, most office parks are relatively horizontal here in the valley. And this was, could we take that model and actually turn it vertical? So it’s kind of a park that works its way into the sky.