Construction firm files to force San Jose tower owner into bankruptcy

"Suffolk Construction has launched an involuntary Chapter 7 bankruptcy proceeding against the real estate affiliate that owns The Fay, a 336-unit, 23-story apartment tower at 10 East Reed Street in downtown San Jose. The tower, developed by two real estate firms, Scape and Morro USA, could be auctioned off this year due to a $182.5 million construction loan that's in default, according to documents on file with the Santa Clara County Recorder's Office. Suffolk, a general contractor that was responsible for the overall construction work on the tower, has also sued the owner of The Fay in Santa Clara County Superior Court, documents filed in July show."

"The construction firm claims that the owner of the housing tower failed to pay Suffolk $9.3 million for work that Suffolk accomplished in the construction of the tower, according to the county court documents. On Nov. 12, Suffolk Construction filed a petition in federal court to force the tower's owner into a Chapter 7 involuntary bankruptcy in an attempt to recoup some of the debt that Suffolk believes the owner has failed to pay. Scape and Morro officials couldn't immediately be reached for comment. In Santa Clara County Superior Court filings, the general contractor and the project's lender expressed concern the owner of the tower would be a no-show in the legal proceedings."

Suffolk Construction filed an involuntary Chapter 7 bankruptcy petition against the real estate affiliate that owns The Fay, a 336-unit, 23-story apartment tower in downtown San Jose. The property faces potential auction after a $182.5 million construction loan went into default. Suffolk also sued the tower owner in Santa Clara County Superior Court, claiming $9.3 million in unpaid construction work. The construction lender is an affiliate of Madison Realty Capital, which, along with Suffolk, expressed concern that the owner has not appeared in legal proceedings. The tower was developed by Scape and Morro USA and obtained its loan in 2021.

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