San Jose church site owner works with city, seeks housing tower sales

A real estate firm snarled in legal thickets is cooperating with city officials to rescue a storm-battered San Jose church even as it seeks to sell a big downtown housing complex and a nearby development site.

SAN JOSE — A China-based real estate firm whose top executive is snarled in legal thickets is cooperating with city officials to rescue a storm-bashed San Jose historic church — even as it seeks to sell other choice downtown housing sites.

Recently, a top San Jose city official went inside the downtown San Jose First Church of Christ Scientist, currently shrouded by a tattered tarp. City staffers and local observers became alarmed about the church’s condition after rains and winds tore through the coverings this winter.

The church is in “surprisingly” good condition, according to Nanci Klein, the city’s director of economic development and cultural affairs, after the parcel’s owner, Z&L Properties, granted city officials access to the site.

Z&L Properties, a unit of a China-based real estate firm, is attempting to unwind its holdings in downtown San Jose through previously completed sales and current attempts to sell properties.

Here are the highlights of the Z&L sales endeavors, past and present, in downtown San Jose:

• The two-tower housing development at 188 West St. James Street is up for sale. The 640-unit complex comprises two residential highrises, each with about 320 condominiums. Z&L has begun a slow process of attempting to sell hundreds of homes in one tower. The other tower is unoccupied.
• A former Greyhound bus terminal property at 60 and 70 South Almaden Avenue is up for sale. The site was previously approved for a housing highrise consisting of 708 units. Construction never began on this property.
• In 2021, Z&L Properties yielded ownership of one of its development sites, a 1.6-acre property near the corner of Terraine Street and Bassett Street. Z&L’s plans for a big residential tower at that location had stalled.

An alliance led by global developer Westbank, local developer Gary Dillabough, and San Jose-based Terrascape — a firm headed by real estate veterans Tony Arreola and Mark Lazzarini — paid $11.4 million for the choice Terraine Street parcel. The property is in a downtown district known as the North San Pedro neighborhood.

The efforts to sell the 188 West St. James complex — once known as Silvery Towers — and the Greyhound bus terminal site, along with the resolution of the rescue of the old church site, arrive at a challenging time for one of the principal executives of Z&L Properties, Zhang Li.

Zhang, who also is co-chairman of Z&L’s primary owner, China-based Guangzhou R&F, faces significant legal problems.

Federal prosecutors seek to extradite Zhang to the United States. The extradition is linked to a U.S. investigation into possible kickbacks and bribery involving a project in San Francisco. Zhang was detained in London in December.

Z&L Properties had proposed the restoration of the old church and the construction of two adjacent housing towers. Neither the renovation nor the residential construction had begun. Now, the church sits next to a surface parking lot and a field that’s choked with weeds.

For some months, city officials were frustrated in their efforts to even replace the tattered cover that only partially protects the old church.

Also blocking matters was the apparent insistence by Zhang to make all the decisions on the church despite his remote status and legal difficulties. But city officials were able to start working with Zhang’s associates at Z&L Properties.

These cooperative efforts enabled San Jose officials to gain direct access to church property, including an examination of the building’s interior.

“Surprisingly, the building is in better shape than we had expected,” Klein said.

The next steps include procuring an estimate to again cover the building, and in a more secure and protective fashion. Plus, the city hopes to reach an agreement with Z&L Properties whereby the developer would pay the cost of the new tarp and its installation. Zhang’s net worth is $1.8 billion, according to an estimate from Forbes, a financial publication.

“The Z&L staff is trying to be helpful,” Klein said. “The immediate goal is to get the church protected and covered again.”

Klein said it was a relief to see the condition of the church’s interior in the wake of exposure of the building to the elements, notably the wild storms of this winter.

“The interior looks sound,” Klein said. “We didn’t see any mold or sagging beams.”