When government gets involved in a project, for the “good of society” expect financial problems, litigation and a finished product worthy of LEGO’s not the real world.
“A big project that would have brought several hundred affordable homes to an up-and-coming downtown San Jose neighborhood has lurched into a default on its loan, leaving its future fuzzy.
The development, if built as proposed as a co-living project, would total 803 units and sprout at 199 Bassett St. in downtown San Jose’s emerging North San Pedro district.
Now, the prospect of foreclosure has jolted the project, which is delinquent on a large loan the property was provided in 2019, according to documents filed with the Santa Clara County Recorder’s Office on June 21.
But the project has tumbled into delinquency on one of its mortgages.
Instead of providing market priced housing, the developer went for “affordable”—now the courts will decide the ownership. In the meantime this well intentioned effort go become an eyesore in the community, before it becomes a slum. Congrats to San Jose for its efforts to look like NYC.
Big residential project in downtown San Jose skids into default
Potential foreclosure, uncertain future looms over San Jose housing complex
CTK Architecture
An 18-story, 803-unit residential co-living development proposed at 199 Bassett St. in downtown San Jose, concept. A big project that would have brought several hundred affordable homes to an up-and-coming downtown San Jose neighborhood has lurched into a default on its loan, leaving its future fuzzy.
By George Avalos , Bay Area News Group, 9/23/21
SAN JOSE — A big project that would have brought several hundred affordable homes to an up-and-coming downtown San Jose neighborhood has lurched into a default on its loan, leaving its future fuzzy.
The development, if built as proposed as a co-living project, would total 803 units and sprout at 199 Bassett St. in downtown San Jose’s emerging North San Pedro district.
Now, the prospect of foreclosure has jolted the project, which is delinquent on a large loan the property was provided in 2019, according to documents filed with the Santa Clara County Recorder’s Office on June 21.
But the project has tumbled into delinquency on one of its mortgages.
An office and industrial building at 199 Bassett St. in downtown San Jose. (George Avalos / Bay Area News Group)
The original loan that is now delinquent totaled $14.74 million when it was issued in 2019 by lender Arena Limited SPV, county property records show. The collateral for this loan is the 199 Bassett St. property, which could be seized by the lender to satisfy the delinquent debt.
Starcity affiliate 199 Bassett Owner obtained the loan at the same time that the developer paid $18 million to buy the property.
As of the end of August of this year, Starcity owed $13.63 million on the mortgage, according to the public documents.
These aren’t the only financial complications to challenge Starcity regarding this project.
The seller of the property, an affiliate controlled by the principal executives of Cupertino-based development firm KT Urban, provided $6 million in financing to buyer Starcity, according to a lawsuit filed in 2020 in Santa Clara County Superior Court.
The KT Urban loan isn’t secured by the property as collateral and is a promissory note rather than a mortgage, the court records state.
Starcity, in its first response to the KT Urban lawsuit, categorically denied all of the allegations and claimed that KT Urban had no basis for its complaint.
In June of this year, Starcity was taken over by a rival co-living firm, New York City-based Common. The acquisition, however, didn’t include Starcity’s projects in San Francisco or the downtown San Jose parcel.
The plan at the time was to find a buyer for the San Jose and San Francisco properties.
The loan default on the Bassett Street site might complicate the downtown San Jose effort. Prospective buyers often wait until the foreclosure is complete because they can then buy the delinquent property at a big discount to the loan amount.
“The Starcity site that will be liquidated is in a great neighborhood that has been redeveloped over the past decade,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
A new owner could bring a fresh eye to the project.
“It’s hard to imagine that the next developer will keep the existing plans,” Staedler said. “It will more than likely be a proposal for a lower density.”
