SAN JOSE — The purchase of two San Jose housing towers offers hope of a turnaround for the troubled residential complex — but also is a reminder of a legacy of downtown blight over which its owner presided.
A double-tower complex consisting of more than 600 residential units has been bought by New York City-based Machine Investment Group, which aims to quickly embark on the project’s construction and orchestrate its recovery.
Machine Investment Group bought the two towers at 188 West St. James Street.
The transaction ends a long-running ordeal at 188 West St. James that has stretched over about eight years.
During the Z&L affiliate’s ownership, a loan delinquency, foreclosure threats, lawsuits, project delays, construction blunders and defects, evidence that some workers were forced to live in an East Bay warehouse, allegations of slave labor, and a suicide when a victim jumped off one of the highrises have haunted the property.
“A fresh start for 188 West St. James” is the guiding principle and strategy pronounced by Eric Rosenthal, managing partner for Machine Investment Group.
The new owner has wide-ranging plans to improve the fortunes of the 188 West St. James towers. Each tower has roughly 300 residential units.
China-based Z&L Properties, acting through an affiliate, had been the owner and developer of the two towers that are now owned by Machine Investment Group.
“Our firm is uniquely positioned to apply its construction, finance and development expertise to stabilize building operations, relaunch sales, and provide an important housing solution to one of the most dynamic residential markets in the country,” Rosenthal said.
Yet while a buyer has taken control of the 188 West St. James towers, that doesn’t mean the effort will immediately bear fruit, warned Bob Staedler, principal executive with Silicon Valley Synergy and a land-use consultant.
“Completing this project will be an immense undertaking,” Staedler said. “Don’t expect this to be completed in the short term.”
Z&L Properties, however, even with the deal to sell the 188 West St. James towers, nevertheless has left behind a forbidding legacy of wrecked projects bedeviled by blight and deteriorating buildings.
First Church of Christ Scientist, a historic empty building at 43 East St. James Street in downtown San Jose, February 2024. (George Avalos/Bay Area News Group)A viable solution hasn’t materialized for two parcels owned by Z&L affiliates that have yet to be developed despite their advantage of commanding prime locations. Both had been expected to be the location of future housing towers. Neither has broken ground.
Here are some details of the respective status of the two downtown San Jose projects that affiliates of Z&L Properties continue to own:
— 43 East St. James Street. Z&L agreed to protect and renovate an old church at this site next to St. James Park. Instead, the real estate firm has neglected the historic building and allowed it to fall into disrepair. Z&L has also failed to develop housing towers on the site. At one point the church structure was covered by a huge tarp that eventually shredded with exposure to the sun, wind and rain. The tarp has been removed. The church remains abandoned.
— 70 South Almaden Avenue. Z&L had proposed a housing project at the site of a one-time Greyhound bus terminal. The old bus depot has become an eyesore. City code inspectors call it a public nuisance. Graffiti has defaced the site at times. Despite being on the city’s radar screen for more than six years, San Jose has done little more than threaten fines and penalties for the owner.
“The city of San Jose needs for Z&L to divest all of its properties,” Staedler said.
Z&L’s real estate adventures reached as far away as a site of pristine open spaces at the far end of south San Jose.
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.
At Terraine Street and Bassett Street in downtown San Jose, Z&L had proposed a large housing development but never broke ground. Z&L 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.
Machine Investment Group might need to be particularly skilled to succeed with the 188 West St. James towers.
“I hope the new owner has the capital and a very creative contractor to deliver the residential units,” Staedler said. The project was completed in 2022.
Machine Investment Group intends to recapitalize the project, prepare units for sale, and re-engage with the community to restore confidence in the towers. The real estate firm intends to sell the remaining condos.
“With its prime location near San Pedro Square and proximity to major tech employers, 188 West St. James is poised to regain its stature as the most sought-after address in San Jose,” Englehart said.
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