Z&L Properties Could Lose San Jose Condo Towers at Auction

Z&L Properties could lose two condominium towers in San Jose at a pending foreclosure auction after defaulting on a $264 million loan.

An affiliate of the China-based investor, FPP MB, owns the double highrises set for auction as early as next month at 188 West St. James Street, in San Pedro Square, the San Jose Mercury News reported.

The pending auction is the latest setback for Z&L, owned by disgraced Chinese developer Zhang Li, who pleaded guilty for bribery in 2023 in connection with a San Francisco public corruption scandal, after being placed under house arrest in London.

The delinquent loan, issued in 2019, financed the construction of the project once known as Silvery Towers, containing 600 condominiums.

The owner of the towers struggled to repay the loan secured by the property, according to court records filed last year. The developer stated in a court filing that the delinquent loan problem had been fixed. It wasn’t.

In October, the primary lender for the towers filed a notice of default for the $264 million loan.

Last week, a subsidiary of Claros Mortgage Trust said it had scheduled an auction for the property in early February. The date of the auction was undisclosed.

At the time of the mid-January filing, the unpaid debt was $212.5 million, including principal, interest, late fees, penalties and other costs. The debt could increase by the foreclosure auction.

In the October default, the lender said the “unpaid principal debt” for the housing towers was just under $169 million.

The loan default suggests the housing complex could become the latest in a growing string of development failures for the properties amassed by Z&L across San Jose and the Bay Area, according to the Mercury News.

One of the towers is the subject of a legal battle between its HOA and Z&L over unpaid fees. In November, the landlord listed about 200 vacant units for rent.

Last month, the City of San Jose imposed property liens against Z&L, 18 months after fining the absentee landlord for abandoning an historic church development site. The liens come from the developer failing to pay more than $142,000 in fines for neglecting the former First Church of Christ, Scientist, at 43 East St. James Street, in Downtown.

At the same time, an affiliate of Z&L defaulted on a $19.5 million loan tied to a site for two unbuilt housing towers at a former Greyhound bus terminal at 70 South Almaden Avenue, also in Downtown San Jose.

— Dana Bartholomew