San Jose housing project site flops into default as owner falters

SAN JOSE — The loan for a property where a massive housing development in downtown San Jose was once proposed — but never built — has flopped into a mortgage delinquency that could trigger a foreclosure.

The prime location at 70 South Almaden Avenue is owned by Full Standard Properties, an affiliate that is controlled by China-based real estate firm Z&L Properties, documents on file with the Santa Clara County Recorder’s Office show.

The Z&L Properties affiliate is in default on a loan of $19.5 million that Shanghai Commercial Bank provided to the real estate firm in 2019, according to Santa Clara County public documents.

This default represents the latest real estate setback for Z&L Properties and its affiliates in downtown San Jose.

The undeveloped downtown San Jose housing site whose loan is in default is a former Greyhound bus terminal where the Z&L Properties-controlled entity had proposed two residential towers that would have produced a combined 708 units.

It appears that some of the original loan amount has been paid down. The Z&L affiliate owed $18.6 million at the time the loan default was filed, the property records show. This amount includes unpaid principal, late fees, penalties and delinquent interest.

The affiliate that Z&L controls bought the Greyhound terminal property in 2016 for $39 million from a group headed by Bay Area real estate executive Mark Tersini.

In September, a Texas-based group whose principal executives include real estate developer Chris Jiashu Xu and business executive William Wang obtained the loan for the property, Santa Clara County property records show.

In January 2024, a group led by Xu paid $135 million to buy most of Eastridge Center, a big regional mall in east San Jose. Xu is active in developing and owning real estate projects in New York City, including the Bronx.

The effort to obtain the loan for the downtown San Jose former Greyhound terminal site appears to have cleared the way for the Xu and Wang real estate entity to file a loan default. The default initiates a process that could lead to a foreclosure and auction of the property.

The maneuvers might also enable the Xu and Wang entity to eventually gain ownership of the property should the foreclosure run its course. The old Greyhound terminal site is near the corner of South Almaden Avenue and Post Street.

“This would be a great location for a housing development,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.

In 2017, San Jose city officials approved two housing towers for the site. One tower would have been 24 stories and the other 23 stories. In 2021, however, the Z&L affiliate allowed a crucial permit to lapse, which left the project in limbo.

This loan default represents the largest in a string of setbacks for Z&L Properties, which at one point was being hailed as a developer poised to bring a string of new towers and dramatic changes to the downtown San Jose skyline.

Instead of several highrises, the Z&L Properties affiliates have managed to build only one project, a double-tower, 600-unit residential complex at 188 West St. James Street near San Pedro Square. Each of the towers contains about 300 condominiums.

Among the struggling Z&L projects in downtown San Jose:

— The 188 West St. James complex. Owned by FPP MB, a Z&L affiliate, the two towers are in default on a $264 million construction loan. As of October 2024, the “unpaid principal debt” on the condo complex was just under $169 million, according to a county filing by lender CMTG California 2. The property is also engulfed in complex other legal battles separate from the default. In recent months, FPP offered about 200 condos for rent in the western tower, a gambit that appears to have borne fruit.

— 43 East St. James Street. Z&L had agreed to protect and renovate an old church at this site next to St. James Park in downtown San Jose, but instead has neglected the historic building and allowed it to fall into disrepair. Z&L has also failed to develop housing towers on the site, which has become blighted.

— West St James Street and Terraine Street for years was the downtown San Jose site where Z&L had proposed a big housing development. Z&L never broke ground on this property and eventually sold it to a real estate alliance of global developer Westbank and Bay Area developers Gary Dillabough, Tony Arreola and Mark Lazzarini.

This news organization placed a phone call to the Z&L Properties Bay Area office in Foster City. The phone number was no longer in service on Nov. 26. The company’s phone number has been out of service for months.

Outside of the downtown, Z&L in 2017 paid $25 million for the vast 3,654-acre Richmond Ranch in southeast San Jose. In January 2024, the Z&L affiliate sold the ranchland for $16 million.

The sale was the catalyst for an intricate plan to eventually enable the Santa Clara Valley Habitat Agency and the Santa Clara County Parks and Recreation Department to buy the property. Z&L never disclosed its game plan for owning the pristine ranchlands.

The loan default for the Greyhound site on South Almaden may become the latest in a string of blunders by Z&L Properties in San Jose.

“Z&L never had a feasible plan for how they were going to develop all of these projects in downtown San Jose,” Staedler said. “They never had the wherewithal to develop multiple projects.”