Z&L Properties to sell condo-retail building in SF’s Hayes Valley

Embattled Z&L Properties is poised to sell a 16,700-square-foot grocery store and condo building in San Francisco’s bustling Hayes Valley.

The China-based developer, whose owner Zhang Li is at the center of a city corruption case, has cut a deal to sell the 139-unit mixed-use building at 555 Fulton Street, the San Francisco Business Times reported. The prospective buyer was not disclosed.

The Foster City-based firm announced the sale a day before a public hearing last week to discuss a stalled Trader Joe’s approved in 2021 for one of the commercial storefronts.

Supervisor Dean Preston, who represents the neighborhood, said he spoke with the buyer and confirmed the property is under contract. He said the buyer is eager to prepare the property for Trader Joe’s.

The five-story building is wrapped in a City Hall corruption case against former San Francisco Public Works chief Mohammad Nuru.  Li was arrested in London in December on suspicion of a kickback scheme involving Nuru to advance the 139-unit project. He was released to house arrest after posting bail of $18.5 million.

Z&L bought the 555 Fulton site in 2015, but the project was plagued by delays city officials blamed on the developer. 

The company was accused by city planners of redesigning the building without the city’s permission after winning approval. 

In early 2020, the project became the center of the corruption probe into Nuru, who was arrested on fraud charges after he was accused of awarding friends with lucrative city contracts, accepting gifts as bribes from developers and lying to the FBI.

Nuru was sentenced last summer to seven years in prison after pleading guilty to honest services wire fraud involving bribery and kickbacks.

Meanwhile, Z&L Properties has struggled to complete projects in San Francisco and San Jose.

In San Francisco, Z&L owed $2 million in back taxes on The Oak, a boarded-up 109-unit condo tower at 55 Oak Street. 

In San Jose, unbought condos in the firm’s new 640-unit luxury complex at 188 West St. James Street in Downtown have been put up for sale for a combined $300 million.

Also, Z&L wants to sell a former Greyhound bus terminal at 70 South Almaden Avenue in Downtown San Jose, approved for twin 20-story housing towers with 708 units. The asking price was undisclosed. 

The developer is also accused of neglecting a historic church at 43 East St. James Street in Downtown San Jose, where it was slated to build two residential towers. Frustrated San Jose officials have said they plan to pursue legal action.

Z&L has listed a 3.8-acre site at 3055 Patrick Henry Drive in Santa Clara that could be redeveloped into 345 to 430 apartments. While the price wasn’t disclosed, the site is valued at $31 million.

— Dana Bartholomew