SAN JOSE — An East Coast buyer has emerged for two landmark San Jose housing towers that had teetered on the brink of foreclosure, becoming a high-profile example of a neglectful and absent owner.
The two residential towers at 188 West St. James Street in downtown San Jose, have been bought by New York City-based Machine Investment Group, the real estate firm said.
China-based Z&L Properties, through an affiliate, had owned and developed the 188 West St. James towers. After numerous construction blunders, only one tower was fully completed and became home to an unknown number of occupants.
The second tower remains incomplete and unoccupied.
The 188 West St. James complex includes approximately 600 residential units. Each tower has roughly 300 residences. The ground floor has commercial spaces for potential retail and restaurant tenants.
“We look forward to partnering with existing building residents and San Jose stakeholders to reestablish this iconic residential project as the premier residential destination in San Jose,” Eric Rosenthal, managing partner of Machine Investment Group, stated in a prepared release.
In October 2024, the 188 West St. James towers went into default on the $264 million construction loan for the tower. An affiliate of Claros Mortgage Trust had provided the financing, according to Santa Clara County real estate records and state business files.
A subsidiary of Claros Mortgage Trust scheduled many public auctions of the towers, during which the lender could have seized the highrises through a foreclosure or sold them to the highest bidder.
The lender postponed every trustee sale it had scheduled for the two towers — until last week.
On May 9, the lender cancelled the auction proceedings completely, an indication that a buyer might have emerged for the troubled towers.
“After years of delays and unmet expectations, today’s news represents a much-needed reset for one of downtown’s most prominent housing sites,” San Jose Mayor Matt Mahan said.
Z&L Properties burst on the scene several years ago with grand plans to develop a series of housing towers in downtown San Jose. City planners and politicians embraced the proposals and approved the downtown residential towers.
So far, the affiliates of Z&L Properties have broken ground on just one project, the double-tower complex at 188 West St. James that isn’t fully complete.
Other Z&L projects include:
— 43 East St. James Street. Z&L agreed to protect and renovate an old church at this site next to St. James Park but instead has neglected the historic building and allowed it to fall into disrepair. Z&L has also failed to develop housing towers on the site.
— Terraine Street and Bassett Street. Z&L had proposed a large housing development but never broke ground. Z&L eventually sold the property near San Pedro Square to a real estate alliance of global developer Westbank and Bay Area developers Gary Dillabough, Tony Arreola and Mark Lazzarini.
— In 2017, a Z&L affiliate paid $25 million for the 3,654-acre Richmond Ranch in southeast San Jose. In January 2024, the Z&L affiliate sold it for $16 million through an intricate plan to eventually enable the Santa Clara Valley Habitat Agency and the Santa Clara County Parks and Recreation Department to buy the property. Z&L never disclosed its game plan for owning it.
The prospect new ownership could be the springboard for a revitalization of this part of downtown San Jose.
“We’re encouraged to see new ownership stepping up to deliver the homes, retail, and renewed energy this site has long promised and that our downtown deserves,” Mayor Mahan said.
