SAN JOSE — Investors and an elderly retiree face the grim prospect they might lose millions of dollars, depending on court rulings and a foreclosure threat over a big San Jose project tied to a Bay Area real estate fraud case.
A legal, financial and property tug-of-war has erupted over the future of a San Jose site where fraud-linked developer Sanjeev Acharya had proposed a mixed-use residential, retail and restaurant village.
The properties in question are at 2101 through 2149 Alum Rock Ave. in San Jose. At that location, Silicon Sage had proposed the development of 796 residential units, along with shops and restaurants.
The east San Jose development site is one of the numerous properties that were part of the Bay Area real estate empire fashioned by failed developer Acharya and Silicon Sage Builders.
The Securities and Exchange Commission claims both Acharya and Silicon Sage have committed an array of fraudulent actions that swindled hundreds of investors, many from the South Asian community.
A federal judge has shoved Silicon Sage’s properties into receivership. The court-appointed receiver has begun an intricate process of attempting to salvage value from the collapsed and bankrupt real estate empire by finding buyers for the properties.
In the case of the east San Jose site, lender Parkview Financial is threatening to foreclose on the property’s loan and seize ownership of the Alum Rock Avenue real estate.
Parkview is poised to take control of the property as soon as the end of January 2022. A foreclosure would wipe out the funds that investors had paid Acharya in connection with his proposed development of the site.
The battle over the property also threatens several million dollars that are still owed to Charles Johnisee, an elderly retiree who had sold the property in September 2020 to Acharya in a $9 million deal.
In September 2020, Silicon Sage and Acharya paid $9 million to obtain a portion of the site for the proposed mixed-use project. But instead of a straightforward deal that provided all $9 million promptly to Johnisee, Archarya convinced the elderly man to agree to a convoluted transaction.
The stakes are high for Johnisee, the retiree stated in the court records. Johnisee had owned the parcels for about 45 years before agreeing to sell Acharya the property.
“It was his retirement nest egg” and “the bulk of his assets,” according to papers that Johnisee’s attorneys filed with the bankruptcy court.
Acharya initially promised Johnisee that the deal would be all-cash and straightforward. Eventually, however, those assurances evaporated and Acharya instead coaxed Johnisee to go along with a complex deal that meant Johnisee and the lender would together provide all of the funding for the property purchase.
Silicon Sage and Acharya wound up paying nothing of the $9 million. Johnisee and his wife received $2.6 million of the $9 million they were owed.
The federal court handling the SEC case against Acharya has given the receiver until Jan. 31, 2022 to market the property and open an escrow agreement for the sale of the Alum Rock site. If that doesn’t happen, then the lender has the right to immediately proceed with a foreclosure and seizure.
A foreclosure would mean Acharya’s investors would receive nothing from the proceeds of the Alum Rock site sale.
Plus, Johnisee and his wife are concerned that upcoming court rulings could cause them to lose their last chance to regain any of the remaining $6.4 million they are still owed from the original $9 million deal.
Johnisee hopes to convince the court during a court hearing scheduled for January that he and his wife should receive any surplus money in the wake of a foreclosure proceeding.The attorneys for the retiree, however, appear to concede in the court papers that Johnisee and his wife won’t ever see the vast majority of what they are owed.
“Johnisee will never be made whole,” his attorneys from Budde Law Group stated in the court papers.
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