Vietnam Town off Story Road in San Jose is shown in this 2010 file photo. The project’s developer, TWN Investments, has sought Chapter 11 bankruptcy protection.
- Real Estate Reporter-Silicon Valley Business Journal
Vietnam Town, a 20-acre retail project on Story Road in San Jose, has sought Chapter 11 bankruptcy protection after lender East West Bank sought to foreclose on the project.
San Jose-based developer TWN Investment Group LLC lists $58.2 million in assets and $53.37 million in debt in the voluntary petition filed in U.S. Bankruptcy Court on Feb. 13, a day before the bank had scheduled an auction of the property.
The largest creditor by far is East West Bank, which holds roughly $47.5 million in secured claims, the filing states. TWN was behind on its loan by nearly $15 million as of Oct. 22, according to documents on file with the Santa Clara County Clerk’s Office.
Unsecured creditors include about 20 business people who plunked down deposits of at least $150,000 for commercial condos at the complex. Vietnam Town’s first phase consists of about 115,000 square feet of space in 1,000-square-foot retail pads.
Reached by phone on Friday, Lap Tang, managing partner of San Jose-based TWN Investment, said he hoped to buy time with the Chapter 11 filing to begin paying back the bank and eventually start Phase 2 of the development. Tang, well-known in the Vietnamese-American business community, said the project ran into trouble not because of a lack of buyers, but because those buyers had a hard time obtaining loans to purchase the spaces because of tight lending practices on the part of commercial banks.
“We had buyers put down deposits, but they could not get a loan; now, there are banks doing commercial loans again,” he said, singling out Bank of the West as particularly supportive. “I believe if the judge can give us more time, then we can pay the bank.”
Tang said about 55 of 115 units had closed escrow. Through the bankruptcy filing, he said he hoped to protect the deposits of the 20 buyers who had not yet closed on their units, Tang said.
“A foreclosure would mean the deposits and investments would be gone,” he said.
“We understand that the deposits were their hard-earned money or from (the) equity line from their homes and they had to pay interest in the past several years,” Tang added in a follow-up email. “We don’t want to see them to lose their deposits.”
Tang said selling the remaining units would be sufficient to pay off the entire construction loan, plus part of the land loan, and that he has received interest from investors in beginning the second phase. That part would include another 185,000 square feet of commercial condos on the remaining 12 acres of undeveloped land, which has already been approved by the city, he said.
An East West Bank spokeswoman declined to discuss specifics of the foreclosure except to confirm that the bank had decided to move ahead with the process. The bank picked up the loan when it took over the deposits and many of the loans of United Commercial Bank, which failed in 2009.
United Commercial provided an $18 million loan in March 2005 to buy the property and an additional $31.1 million in December 2008 to build the first phase of the project, according to previous Business Journal reporting.