A San Jose property that was meant to be the site of an 803-unit affordable housing project in San Jose now faces auction or foreclosure.
The owner of the 199 Bassett Street property, an affiliate controlled by Starcity, paid $18 million for the site in 2019 with plans to build a co-living residential development, the Mercury News reported. The developer never broke ground on the project and the lender, an affiliate of Arena Investors, is threatening to foreclose on the loan and seize ownership.
The lender has scheduled an auction for early February to find a buyer for the property along with its delinquent loan, which totaled $14.7 million when it was issued in 2019. As of last August, Starcity still owed $13.6 million.
In addition to the loan, Starcity also borrowed $6 million from KT Urban, the sellers of the property, when it bought the site. The KT Urban loan isn’t secured as collateral and is a promissory note.
Last June, Starcity was taken over by another co-living firm, New York City-based Common. The acquisition didn’t include any of Starcity’s projects in San Francisco or the San Jose property.
The plan was to find a buyer for the properties, but the loan default could complicate matters, as many prospective buyers choose to wait until a foreclosure to buy delinquent properties at a bigger discount.
The Bassett Street site will also provide a challenge to any potential buyers, due to its shape, Bob Staedler, a principal executive with Silicon Valley Synergy, told the Mercury News.
“The site is very challenging,” he said. “It is adjacent to a very successful redevelopment area, but too narrow for a significant tower. It will be interesting to see what the winning bidder proposes.”
[MN] — Victoria Pruitt