Downtown San Jose Condos Find Buyer

Machine Investment Group snapped up two residential towers in downtown San Jose from Z&L Properties through a fast-track foreclosure proceeding.

The New York-based firm, acting through an affiliate, paid $181.9 million for the two, 22-story high-rises at 188 West St. James Street, The Mercury News reported. Each tower contains about 300 condominiums, some of which are owned and the rest of which are rentals, for a total of 643 units.

The sale price aligns with the unpaid debt on the property. To help finance the purchase, Machine Investment obtained a $215 million loan from an affiliate of New York-based Benefit Street Partners.

An affiliate of China-based Z&L Properties owned and developed the towers starting in 2015 and finishing in 2021. Z&L lost the properties when it defaulted on a $330 million loan from an affiliate of Mack Real Estate Credit Strategies granted in 2019 to finance the property. Once Z&L went into default, lenders pursued an expedited deed-in-lieu of foreclosure process. The debt was transferred to Machine Investment Group’s affiliate on June 3.

The West St. James towers saw its fair share of turmoil over the past decade, with a loan delinquency, foreclosure threats, lawsuits, project delays, alleged construction errors, allegations of slave labor, evidence that some workers were forced to live in a warehouse in the East Bay, and intrusions by homeless people into the property’s hallways. One person even died on the property.

Machine Investment Group managing partner Eric Rosenthal said his firm will give the property a new life.

Plans include recapitalizing it, preparing rental units for sale and connecting with the local community to attract buyers.

“Our firm is uniquely positioned to apply its construction, finance and development expertise to stabilize building operations, relaunch sales, and provide an important housing solution to one of the most dynamic residential markets in the country,” Rosenthal said, per The Mercury News.

— Chris Malone Méndez