SAN JOSE — A downtown San Jose housing tower built by a China-based real estate firm whose top boss has been linked to a Bay Area fraud case may face foreclosure proceedings due to delinquent homeowners dues.
The property involved in the delinquencies is the two-tower residential complex at 188 West St. James Street in downtown San Jose, according to documents on file with the Santa Clara County Recorder’s Office.
China-based real estate firm Z&L Properties, whose principal executive Zhang Li was entangled in a federal criminal case in San Francisco that was spawned by alleged fraud and kickbacks, developed the two San Jose towers.
The double-highrise project totals 640 units. Each tower contains roughly 320 residences.
After completing the delay-marred project, Z&L decided to attempt sales of the individual condos in the western tower at West St. James Street and Terraine Street. The eastern tower at West St. James Street and North San Pedro Street remains empty.
The delinquencies have arisen from unpaid dues to the homeowners association for unsold condos in the western tower, county real estate records show.
“It is absolutely mind-boggling that Z&L can’t resolve the HOA payments,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
Once a condo is sold, the new owners are responsible for paying the homeowners’ dues on those purchased units. The real estate developer has managed to sell scores of condos in the western tower, county documents show.
Z&L, however, is responsible for paying the homeowners’ dues on condos that have been completed but have yet to be sold.
The county property documents show that Z&L has flopped into delinquency on at least 10 condos in the western tower as a result of the company’s non-payment of HOA dues.
“If your property is in foreclosure because you are behind in your payments, it may be sold without any court action,” the notices of default linked to the unsold condos stated. The 188 West St. James Owners Association filed the default notices.
Z&L Properties also has failed to pay numerous subcontractors in connection with construction work or other tasks they performed in the double-tower complex.
Subcontractors have filed several mechanic’s liens against the property.
Z&L Properties has proposed several projects in downtown San Jose but has yet to build any of them, other than the two-tower complex on West St. James.
Among the downtown San Jose project sites that Z&L Properties owns:
— A pair of housing high-rises and the revamp and rescue of a historic church at 252 N. First St. in San Jose. Neither tower has been built and Z&L has performed no renovation work on the church.
— A project of two housing towers that would replace a former Greyhound terminal at 70 S. Almaden Ave. This project has been delayed and is up for sale.
Z&L Properties has also put up for sale the two towers at 188 West St. James. A purchase is not expected this year, however. The company may be pursuing a sale to help raise cash to help pay off ongoing real estate debts.
“They have assets that they can sell” to satisfy the HOA debts and other obligations such as the renovation of the old church, Staedler said. “If Z&L chooses not to do so, the courts will rule against them harshly.”
As for the notices of default, an HOA in California can pursue foreclosure and sale of a property to recoup the unpaid assessments and other costs related to the delinquency.
In 2019, the double-tower complex received a $330 million loan from Mack Real Estate Group in the form of construction financing to complete the development of the troubled project, which was slowed by years of delays.
A construction loan, however, is typically a short-term financing vehicle that terminates in a few years. Developers then usually scout for a long-term loan to replace the construction financing.
The upshot is that debts on multiple fronts now cloud the financial prospects for the housing complex at 188 West St. James Street.
“It is just a matter of time for Z&L to lose control of this property,” Staedler said.
Source: www.mercurynews.com