San Jose Site Proposed for Housing Flops Into Default

A blighted site in west San Jose that has been proposed for everything from offices to residences has fallen into default.

Lender Golden Bank filed a notice stating that the property owner, an affiliate of Pacific Row Development, defaulted on a $6.7 million loan tied to 335 South Winchester Boulevard, the East Bay Times reported. Pacific Row purchased the site in 2018 for $1.5 million, and an affiliate secured the loan from Golden Bank in 2021.

The one-story commercial building at the site, currently abandoned behind a chain link fence, was previously home to Khanh’s restaurant. The Vietnamese establishment relocated to Campbell and vacated the west San Jose property in 2021. The building fell into blight and has now caught the attention of San Jose’s code enforcement division, according to the East Bay Times. The property is across the street from the growing Santana Row mixed-use development.

An initial proposal for the site called for an office building to replace the former Khanh’s structure. The Pacific Row affiliate changed its plans in 2024, opting to pursue a 75-unit apartment project with ground-floor retail instead. The building was put up for sale with an initial asking price of $25 million at the same time the residential proposal surfaced, with the price later dropping to $20 million.

San Jose code enforcement inspector Manuel Duarte told a city appeals hearing board earlier this spring that blighted conditions included “overgrown vegetation, graffiti, and the presence of solid waste,” according to the East Bay Times. Neighbors have also expressed their disdain for the site.

Defaults at commercial properties in San Jose have been piling up over the past year, though they’ve largely been at hotels that have flopped into loan delinquency as part of a wider slump in the Bay Area’s lodging market. Earlier this month, the 52-room Fontaine Inn in east San Jose fell into default on a $6.5 million loan from State Bank of Texas. Coincidentally, a 204-room Motel 6 and Super 8 by Wyndham complex two doors down is also in default on a $21.7 million property loan. Last month, the La Quinta Inn & Suites in San Jose defaulted on a $16 million loan.

— Chris Malone Méndez