SAN JOSE — A retail complex in San Jose that was never completed has been seized by its lender, the latest chapter for a project that was hampered by its design, finances and the coronavirus outbreak.
The property occupies a prominent site on the busy commercial strip of Monterey Road in San Jose and was proposed a few years ago as a key commercial complex next to new residential developments expected to provide plenty of customers for the project’s merchants.
“The project was next to a housing development,” said David Taxin, a partner with Meacham/Oppenheimer, a commercial real estate firm. “This retail was something the city wanted to see on Monterey Road.”
The development, consisting of two buildings that together total 15,500 square feet, received $6 million in financing in 2019 from lender Secured Income Fund II, documents filed in 2019 with the Santa Clara County Recorder’s Office show.
The developer was a group led by San Jose-based real estate executive Adeel Mahmood, according to the property records.
In May 2021, the lender filed a notice of default, a document that stated the developer was delinquent on the $6 million in financing that Secured Income had provided.
Secured Income Fund II, the San Jose-based lender, has now taken ownership of the property through a foreclosure proceeding that was completed in late January, county records show.
The lender paid $1 million to take control of the retail building, even though the unpaid debt, including finance charges, late fees and penalties, totaled $7.2 million at the time of the foreclosure, according to the property documents.
The building’s exterior was completed in recent years but the interiors were never finished.
The two-building retail and commercial center, bounded Monterey Road, Montecito Vista Drive, Goble Lane and Esfahan Drive, languished behind a temporary fence while weeds choked its boundaries.
The retail site’s design was one of the problems with the project, Taxin said.
“The parking is very limited and if any stores had ever opened, customers would have to talk down the side streets and enter in the back, not on Monterey,” Taxin said. “That is very inconvenient for customers.”
Taxin also believes the construction costs, including the amount to complete the interiors and clean up the adjacent sections, would have required the owner to charge tenants high rental rates.
Plus, the coronavirus has made retail development a more risky proposition than before the outbreak of the deadly bug.
Lenders typically prefer not to develop properties they have taken back through foreclosures. This inclination might mean Secured Income might seek to sell the site to a developer.
If so, what might the two buildings become, especially since the exteriors are all complete?
“It could be some kind of office, a school, or day care, or after-school program,” Taxin said.