Foreclosed San Jose apartment hub is bought by veteran real estate execs

SAN JOSE - A high-profile apartment tower in San Jose has been bought by an alliance of real estate veterans, a purchase that ends its foreclosure ordeal and arrives on the heels of a pilot program to create affordable housing in the building.

The Fay, a downtown San Jose high-rise, has been bought for $175 million by a business entity led by real estate executives Andrew Jacobson and Gary Dillbough, documents filed May 27 at the Santa Clara County Recorder’s Office show.

Jacobson and Dillabough purchased the same 336-unit apartment hub where San Jose officials have formally kicked off a program designed to bring middle-income households to the tower by creating 197 affordable housing units in the building.

The acquisition also breaks up a cloud of uncertainty that had loomed over the building in the wake of a foreclosure by an affiliate of New York City-based Madison Realty Capital, the lender that took ownership of the tower in January 2026.

To bolster the deal, Madison Realty’s affiliate provided Jacobson’s and Dillabough’s group with $133.5 million in financing for their LLC’s purchase of the 23-story tower.

The new owners are based in downtown San Jose. Jacobson, an executive with Canada-based developer Westbank, said Westbank isn’t involved with The Fay at present. Dillabough is a principal executive with San Jose-based real estate firm Urban Community.

Both Jacobson and Dillabough see plenty of upside with The Fay, which is a very new apartment building that opened with great fanfare in 2024 but ran into financial woes in 2025 that eventually led to the foreclosure.

“This building has great bones,” said Jacobson, a San Jose-based real estate executive who is leading this effort. “The units are spectacular.”

Under the affordable housing program, the city of San Jose is providing a subsidy that would enable 197 units to be made available at discount prices to middle-income workers.

San Jose will lease the apartments from the new owners. The lease began on May 26 and lasts 10 years, unless ended by mutual agreement before that, county records show. The lease also has an option for a five-year extension.

Apartments would be available to people with an annual income ranging from 80% to 110% of the area median income. The affordable housing pilot program would apply to 150 one-bedroom apartments and 47 two-bedroom units, city officials said.

The affordable housing program is designed to help teachers, police officers, firefighters, city workers and other public servants live closer to where they work, city officials say. Preferences will be given to people in these fields, but the units will also become available to the public at large.

At present, about 175 of the 336 units are occupied, city officials estimated. That works out to an occupancy rate of 52% as of this week and also points to a potential primary factor behind the prior financial pitfalls for the tower.

As a result, the pilot program for affordable housing might create fast-rising occupancy levels and bring hundreds of new residents to the trendy and lively SoFA district of downtown San Jose, a boost for area merchants.

Interest in the affordable apartments has already begun to emerge.

“We have over a dozen applicants so far,” said Sarah Fields, a deputy director with the San Jose Housing Department. “There's a lot of interest.”

People could begin to move into the units starting in August, Fields estimated.

The new ownership group is seeking to revamp the building and activate the empty retail spaces at the corner of East Reed and South First Street.

“We’re going to rebrand the building, change up the lobby, and get some great retail on the ground floor,” Dillabough said.

The owners intend to encourage the rise of a bustling area in the vicinity of the tower.

“We want to bring a lot of life to this interchange and area,” Dillabough said. “It’s all about the neighborhood and vibrancy.”

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This story was originally published May 28, 2026 at 5:23 AM.