Z&L Properties, a US affiliate of mainland China property giant Guangzhou R&F Properties, has been kicked off two of its four development projects in California’s Silicon Valley after failing to hit contractually designated project milestones, according to local media.
San Jose City officials, in cooperation with Z&L Properties, said that they are in talks with prospective developers to take over the pair of stalled projects in San Jose known as North San Pedro and Park View Towers, both part of the city’s downtown revitalization plans.
The City of San Jose said it had been legally sanctioned to terminate Z&L Properties’ involvement in the projects after the developer had broken the terms of its development agreement.
The move by the city comes just over a year after the US unit of the mainland giant made an out-of-court settlement for $250,000 following a probe into forced labour on another of its downtown San Jose developments, a 640-unit residential complex formerly known as Silvery Towers.
San Jose Looking for a Replacement
Nanci Klein, deputy director of economic development and director of real estate at the city of San Jose, said that the city is hopeful a buyer for the projects can be secured in a short time frame, while a public relations representative for Z&L Properties confirmed that a buyer for the North San Pedro site is expected to be identified within 60 days, according to local press.
R&F Properties acquired the North San Pedro development two years ago, buying the 305-unit residential project during a period when the developer was ramping up its overseas portfolio.
The 221-unit Park View Towers complex, acquired at the same time as North San Pedro, has also been hobbled following disputes with subcontractors.
At least two mechanic’s liens have been filed against the developer due to unpaid bills on the Park View Towers project at 252 North First Street. According to Santa Clara County public records, architectural and design firm DLR Group Kwan Henmi has made a claim for $847,000 in unpaid invoices, while Civil Engineering Associates is owed $4,900.
Silvery Towers Tarnished by Forced Labour Case
In addition to failing to pay its suppliers, R&F’s projects in northern California have been accused of using substandard materials and human trafficking.
The developer’s Silvery Towers development, which was the subject of a US Labour Department probe last year, is said to be at least 24 months behind schedule, according to a property professional familiar with the matter.
As a result of last year’s investigation, Full Power, an affiliate of R&F Properties, was instructed to pay $250,000 in back wages to unpaid workers supplied to work on the Silvery Towers site by a company called Nobilis Construction.
Federal Immigration and Customs Enforcement agents freed more than a dozen immigrant workers held in a shipping container by a Nobilis agent in Hayward, a city 27 miles from San Jose.
The developer denied any wrongdoing and negotiated a resolution to the issue in lieu of a protracted legal battle. The Department of Labour said at the time that the case represented a major victory in the fight against human trafficking. In August last year Z&L’s Silvery Towers project was again investigated by state authorities after a worker fell to his death on the site.
Building inspectors have also red-tagged and issued stop-work warrants several times on Z&L project after the developer had repeatedly contravened state construction and safety regulations, according to the industry source.
In one instance, the developer is said to have been obliged to re-order exterior glass for an entire building after buying, against recommendations, glass that did not meet building regulations.
R&F has also had difficulty paying its bills on a project in Australia, with a Brisbane development being sent into liquidation in 2017 after creditors successfully sued the company’s Aussie subsidiary. Following the court liquidation order R&F settled its bills to avoid having the project shut down.
Bills Go Unpaid as Co-chair’s Son Buys a Bel Air Megamansion
While workers and contractors on R&F projects in California are going unpaid, the son of company co-chair Zhang Li seems to have had no trouble finding the cash for a $75 million Bel Air megamansion that the 37-year-old is said to have purchased online last month via the Zillow app.
Liang “Johnson” Zhang’s 24,222 square foot (2,250 square metre) abode, which comes with nine bedrooms and 12 bathrooms, was previously owned by tech tycoon Halsey Minor.
The online purchase came after the scion of the Guangzhou property giant had already bought a €35 million ($39 million) hilltop villa in superyacht central Portofino on the Italian Riviera earlier this year.