Z&L Properties Defaults on $20M Loan for San Jose Site

Z&L Properties has defaulted on a $19.5 million loan tied to a site for two unbuilt housing towers in Downtown San Jose.

Full Standard Properties, an affiliate of the beleaguered China-based developer, failed to pay the mortgage loan backed by a former Greyhound bus terminal at 70 South Almaden Avenue, the San Jose Mercury News reported, citing public documents.

The loan originated in 2019 from Shanghai Commercial Bank. In September, a Houston-based investment group led by Chris Jiashu Xu and William Wang bought the loan for an undisclosed price.

Full Standard still owes $18.6 million. The purchase by Xu and Wang could allow them to ultimately foreclose on the property.

Z&L Properties bought the 1.6-acre site in 2016 for $39 million, with plans for two residential towers of up to 24 stories with 708 homes atop 14,000 square feet of shops and restaurants.

But then the project stalled in 2021 when the Z&L affiliate allowed a permit to lapse.

The loan default is the latest setback for Z&L, owned by disgraced Chinese developer Zhang Li, who pleaded guilty for bribery in connection with a San Francisco public corruption scandal, after being placed under house arrest in London.

The phone number for the firm’s office in Foster City has been out of service for months, according to the Mercury News.

The Chinese billionaire, whose troubled company has left unfinished projects across the Bay Area, only managed to build one project, a twin condominium tower at 188 West St. James Street in San Jose.

The 600-unit condominium complex is in default on a $264 million construction loan. As of October, the “unpaid principal debt” on the condo complex was just under $169 million, according to the Mercury News, citing a county filing by lender CMTG California 2.

One of the towers is the subject of a legal battle between its HOA and Z&L over unpaid fees. Last month, the landlord listed about 200 vacant units for rent.

Xu, the co-owner of the loan on the unbuilt San Jose towers, is a native of China and owns United Construction and Development, an active developer in Queens, New York.

In January, a group led by Xu paid $135 million to buy most of Eastridge Center, a regional mall in east San Jose.

In August, a penthouse at Xu’s Skyline Tower, the tallest in Queens, set a local price per square foot record when it closed for $2.3 million, or $2,300 per square foot, according to The Real Deal.

At the same time, Xu filed plans to build a 14-story, 213,000-square-foot building in Long Island City at a property he bought for $40 million.

— Dana Bartholomew