San Jose Housing Tower Faces Default

In the latest sign of Bay Area multifamily housing woes, a San Jose residential tower has fallen into default.

The Fay, a 23-story, 363-unit apartment building at 10 East Reed Street, is in default on a $182.5 million construction loan, The Mercury News reported. The loan delinquency at the downtown San Jose building comes less than a year after the residences opened in December 2024.

An affiliate of London-based real estate firm Scape bought the development site in 2020 for $16.5 million, according to The Mercury News. The following year, Scape obtained a loan from a Madison Realty Capital affiliate to finance construction of the residential tower. Scape brand Murro developed the tower.

Murro owed $189.9 million as of June 30, according to the official notice of default cited by The Mercury News. The amount purportedly includes interest, late fees and penalties.

It remains to be seen whether the Madison Realty affiliate will foreclose the loan and put the property up for auction or seize the tower itself to satisfy the delinquency.

Elsewhere in the Bay Area, Maximus Realty Partners recently defaulted on the loan for The Cove at Tiburon, a 283-unit property in Marin County. That delinquency followed Maximus’ default earlier this year on a $1.5 billion loan backed by the 3,165-unit Parkmerced complex in San Francisco, south of San Francisco State University and the Stonestown Galleria mall.

Residential isn’t the only sector struggling in the Bay Area.

In addition to slumping office occupancy rates across the region, several hotels in the Bay Area have fallen into loan default, foreclosure or bankruptcy proceedings over the past year.

In San Jose, for example, an affiliate led by Texas-based lodging executive Jagmohan Dhillon defaulted on a $21.7 million loan provided by Choice Hotels International for a two-hotel complex consisting of a Motel 6 and a Super 8 by Wyndham. The property at 2560 Fontaine Road boasts 204 rooms across the two hotels. Another Dhillon-led affiliate, D Lassen, defaulted on a $7.7 million loan from the State Bank of Texas and filed for bankruptcy at the 102-room Super 8 by Wyndham in Livermore in May.

— Chris Malone Méndez