The costs to finish a housing development in Fremont and another in San Jose have skyrocketed, which means the investments made by teachers and other public employees are now at risk of being wiped away.
Silicon Sage Builders started developing a 91-unit complex on Almaden Road in San Jose called “The Almaden.” The firm also began construction on a 91-unit development on Osgood Road in Fremont called Savant at Irvington. Problems for the complexes started popping up after the Securities and Exchange Commission opened a fraud investigation into Silicon Sage Builders and its founder Sanjeev Acharya. According to the Mercury News, mounting debt forced the company’s extensive real estate portfolio to crumble and now all of Silicon Sage’s properties including The Almaden and Savant at Irvington are being controlled by a court-ordered receivership.
In a phone call transcript in August obtained by the Mercury News, the receivership warned TriGate Capital which tried to bail the project out earlier this year with a $20 million injection of funds, that the two projects were flatlining. “The projects were unlikely to return even a dollar of TriGate’s $20 million rescue finance, much less provide any return for investors,” the court-appointed receiver told TriGate. And there’s an unspecified amount of retirement funds from teachers and public employees that are tied up in the project and are now at risk of being totally lost. Those investors were hoping to cash in after the developments were completed and sold.
Construction costs have escalated rapidly amid a nationwide supply-chain crisis, and that is primarily the root of the trouble. The Mercury News also obtained documents filed by the court-appointed receiver which now put the cost to finish the project in San Jose at $29 million, up from an estimated $16 million in May. In May, the cost to finish the Fremont project was around $7 million, but that has apparently jumped to $18.9 million. Now, TriGate appears to be on the defensive claiming that the court-appointed receiver has mismanaged the construction of the projects and is also sabotaging their financial stability.
“This receiver’s management of the projects has seen the project’s waste as assets,” TriGate said in the court papers obtained by Mercury News. TriGate is now trying to regain control of the projects from the receiver so it can restart construction and complete the projects as quickly as possible to try to salvage the investments. It’s unclear so far when that could happen and right now there is no timeline for completion for either project.