San Jose has granted permits for a boutique hotel near Santana Row

As the economy slows construction of new hotel and restaurant projects in Silicon Valley, one developer is bucking the trend and moving forward with plans for a boutique hotel near Santana Row and Valley Fair.

San Jose signed special use permits Wednesday for KT Urban’s seven-story, 85-foot-tall, 176-room project called the Olin Hotel, which will replace a gas station at 425 S. Winchester Blvd., but neighboring property owners voiced their longstanding grievance with the proposal.

“There was no public outreach about this project and it was literally forced upon us,” said resident Dave Duquette.

KT Urban originally purchased the property four years ago with plans to build a 65-foot-tall mixed-use building with residential, retail and office space.

While San Jose agreed to the original vision, the COVID-19 pandemic changed market conditions through higher interest rates and material costs, forcing developer Mark Tersini to deviate from those plans and find another, financially viable use.

For the project to generate a return on investment, the proposed hotel would have to be 20 feet taller than plans for a mixed-use development, Tersini said, and that would require City Council approval. Because the project borders a residential area, KT Urban redesigned the building to provide more distance from the homes.

However, throughout the planning process, neighbors raised concerns about traffic, their privacy and changes to the height limits set out in the 2017 urban development plan.

During a Planning Commission meeting last year, Winchester Orchard Neighborhood Association President Daphna Woolfe said approving the project would contradict the city’s long-term planning mandate, which calls for integrating new development without disrupting existing neighborhoods.

“Simply ignoring the work of the Planning Department and these working groups sends a clear message to citizens: Do not volunteer because your work and your voice will not be valued,” Woolfe said.

Although the Planning Commission had no input into the final decision, it was torn over the changes to the project last year and could not agree on whether to make a recommendation. The council ultimately approved changes to the height permits, but still required the city’s planning director to decide whether to issue the permits.

In planning documents submitted to the city, KT Urban estimated the project would take 21 months. The city has also agreed to allow extended construction hours on Saturdays from 7 a.m. to 7 p.m.

Tersini said he requested a building permit on Saturday to complete the project as soon as possible, but added that most of the work would be done indoors. He also responded to community members’ request to announce when the developer plans to start pouring concrete.

While city staff attempted to address some of the concerns, they explained that some of the issues raised could not be considered during the permitting review of the project.

“There are certain areas of authority as to what staff can and cannot do,” said John Tu, the hearing officer who issued the permits.

Despite plans to move forward with construction of the Olin Hotel, market conditions have impacted the hotel industry, resulting in the sale of two of San Jose’s most prominent hotels and delays to several already approved projects in Silicon Valley.

Last year, the City of Santa Clara Planning Commission granted Mogul Capital LLC a two-year extension to build its six-story, 396-room hotel south of the Norman Y. Mineta San Jose International Airport.