A developer with dreams of turning a blighted office building in West San Jose into 137 homes has defaulted on a loan, with the lender threatening to seize the property.
Kochland, an affiliate controlled by Kenneth Ryan Koch of Grass Valley, has received notice of a $505,000 loan default for its five-story mixed-use apartment project at 826 North Winchester Boulevard, the San Jose Mercury News reported.
Emerson Vista, a San Jose-based lender, filed the notice saying its loan last December was in default and is threatening to try to seize ownership of the site.
The vacant two-story office building, covered with graffiti and surrounded by a chain-link fence, has been cycling in and out of foreclosure for years. Since the start of the pandemic, the Winchester Professional Building has had three owners and faced two foreclosure proceedings.
The 11,700-square-foot building north of the Westfield Valley Fair and Santana Row malls was seized through foreclosure in 2021. In December of that year, Koch bought the L-shaped building for $10.75 million.
He then failed to repay its loan of $6.45 million, according to its lender, Sacramento-based Socotra REIT, and the site was slated to be auctioned on Jan. 6.
But the foreclosure sale was canceled after Koch landed two loans in late December totalling $1.23 million. The loans bought Koch some time – until Emerson Vista, a third lender, demanded payment.
Koch isn’t the first developer to hit the wall at 826 North Winchester.
In March 2020, Kenneth Colbert, a Redondo Beach-based investor, paid $8.25 million for the building after securing a loan for $6.1 million. After the property’s mortgage became delinquent, the building was auctioned off through a foreclosure proceeding.
In June 2021, a group led by Los Gatos-based Sridhar Capital paid $2.9 million at auction to buy the offices, built in 1958. Two recent owners had planned housing at the 0.6-acre site.
Last year, Colbert’s group proposed a mixed-use complex with ground-floor shops and restaurants.
In May, Koch’s group proposed a five-story mixed-use housing complex. But this year another Koch affiliate lost two properties to a foreclosure seizure in Los Gatos, according to the Mercury News.
On Jan. 25, two Downtown Los Gatos commercial properties that Koch owns through a different affiliate were seized by a lender in a $7 million foreclosure auction.
— Dana Bartholomew
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