Real Estate Executives, Flow Acquire The Fay Apartments

The Fay residential tower in downtown San Jose is under new ownership after falling into default last year.

A business entity led by developers Andrew Jacobson and Gary Dillabough bought the 23-story building at 10 East Reed Street for $175 million, the East Bay Times reported, citing documents filed Wednesday with the Santa Clara County Recorder’s Office. Flow, a real estate firm founded by WeWork co-founder Adam Neumann, announced the acquisition of the 336-unit property in a press release shared with The Real Deal, which would mark the firm’s West Coast debut after growing in South Florida and Saudi Arabia.

The sale arrives on the heels of an announcement from San Jose officials that it would bring middle-income households to the building by designating 197 of the 336 units as affordable housing. An affiliate of Madison Realty Capital, the lender that took ownership of the property in January, provided the buying group with $133.5 million in acquisition financing.

As part of the affordable housing program at The Fay, the City of San Jose leased 150 one-bedroom apartments and 47 two-bedroom units in the building. The lease started May 26 and lasts 10 years with an option for a five-year extension, according to the East Bay Times.

The city will provide subsidies for workers making between 80 percent to 110 percent of the area median income to live in the tower. In Santa Clara County, that works out to between roughly $111,700 and $150,260 annually for a one-person household. The program is aimed to bring teachers, police officers, firefighters, city workers and other public servants closer to where they work. Workers in those fields will be given priority, but the units will also become available to the general public.

As it stands, approximately 175 of the 336 units are occupied. The new residents could begin moving in later this summer, Sarah Fields, a deputy director with the San Jose Housing Department, told the Mercury News.

The building’s new owners are looking to renovate the property, which was built in 2024 and opened last year, and activate the empty commercial spaces at the street level.

“We’re going to rebrand the building, change up the lobby and get some great retail on the ground floor,” Dillabough said. “We want to bring a lot of life to this interchange and area. It’s all about the neighborhood and vibrancy.”

Flow said it will bring its “technology platform, community programming, sustainable design and operational model” to the property and said the building will be “rebranded and reimagined with Flow’s signature approach to residential living.”

“This is exactly the kind of asset Flow was built to operate, and exactly the kind of city we want to be in,” Neumann said in a statement.

— Chris Malone Méndez