SAN JOSE – Rapidly rising construction costs have thwarted efforts to complete large housing developments in San Jose and Fremont that have been linked to a massive real estate fraud case, court papers show.
Among the projects facing rising construction costs are The Almaden, a 91-unit residential complex on Almaden Road in San Jose; and Savant in Irvington, a 93-unit residential project on Osgood Road in Fremont, according to documents on file with the US District Court in San Francisco.
The San Jose and Fremont residential complexes are among several Bay Area properties that were originally proposed or developed by real estate executive Sanjeev Acharya and his company, Silicon Sage Builders. The Securities and Exchange Commission has accused Acharya and Silicon SEZ of duping and duping hundreds of investors. The properties of Silicon SEZ have been sent to court-ordered receivership.
The court-appointed receiver, David Stapleton, has launched a search to complete two condominium projects and then sells the condos to individual buyers after the housing complexes are completed.
From food to gas, manufacturing is becoming increasingly expensive, according to a federal court filing by the receiver in the case.
“The receiver continues to investigate all construction-related costs and additional aspects of the budget,” Stapleton said in a court filing in late June. “These important and complex issues need to be fixed and this requires substantial time.”
Making matters worse: Issues related to the coronavirus have halted the processing of requests and updates involving city employees in both San Jose and Fremont, Stapleton claimed in the filing.
Worldwide disruptions triggered by the virus-induced crisis and supply-chain issues have driven up construction and material costs.
“Covid-related staffing issues are impacting (construction) trades and are not dissimilar to more socioeconomic factors affecting several industries across the country,” the court filing said.
Stapleton stressed that it is becoming increasingly difficult to recruit and retain construction workers.
“Availability of competitive workmanship is rare and when reliable sub-contractors are available, their bids are priced at a premium compared to the pre-COVID environment,” claimed the receiver in the legal papers.
These problems have baffled both the San Jose project at 1821 Almaden Road and the Fremont project at 42111 Osgood Road, legal papers have shown.
In September 2021, the San Jose project was expected to require $15 million to $17 million to complete, and the Fremont project was estimated to have a full cost of $7 million to $9 million.
Now, it is expected that at least $37 million to $38 million will be needed to complete the San Jose Almaden housing development—a $23 million to $24 million increase in “hard costs” and $14 million in “soft costs”. million increments. Court papers state.
Last fall, $6 million to $8 million was estimated to be needed to finish the Fremont Osgood development.
Now, an additional $22 million to $23 million is expected to be needed to complete the Fremont Osgood housing project. This includes an increase in “hard costs” from $12 million to $13 million and an increase in “soft costs” by $10 million.
Hard costs mainly include construction materials and equipment, as well as wages for workers. The soft cost includes “insurance, consultants, professionals” and other items, the receiver said in the filing.
The uncertainty and delays looming over San Jose and Fremont housing developments also create a prohibitive prospect for Silicon SEZ’s investors and creditors.
Victims of the alleged fraud hope that the proceeds from selling the projects will generate funds to repay them after Acharya’s real estate empire plunged down a mountain of debt and legal woes.
But the receiver expects to generate cash through the sale of condo units in both the San Jose and Fremont projects.
In an ominous revelation, the receiver left open the possibility that construction expenses could rise even higher.
“The budget is being revised continuously as issues and additional items arise,” the receiver said in the court filing.