Lender Advances Foreclosure on San Jose Apartment Complex

A lender is proceeding with plans to foreclose on a delinquent loan for a San Jose apartment complex. The Neo at First, a 50-unit property located at 975 South First Street, is set to change hands after defaulting on its loan in September 2023. Records from Santa Clara County indicate that the property will be auctioned in early 2026 unless a buyer emerges prior to foreclosure.

CTBC Bank Corp. financed the development with a loan of $20 million when the four-story building was completed in 2020. The lender is prepared to reclaim the property if no bids are made during the auction process.

Background of the Complex and Ownership

The ownership of The Neo at First is associated with a Cupertino-based business entity led by Xuhan Yu as the chief executive officer. In 2017, this group acquired multiple parcels for $5.2 million that ultimately housed the apartment complex.

This situation is not unique to The Neo at First. Another nearby property, The Fay, located at 10 East Reed Street, also entered default on its $182.5 million construction loan in July 2023. The Fay is a 23-story residential tower comprising 336 units, which opened in December 2024 with high expectations for revitalizing downtown San Jose.

Market Trends and Challenges

Despite these defaults in the urban core, the apartment market in South San Jose seems to exhibit resilience. On December 22, 2023, a Sacramento-based nonprofit acquired Ascent, a 650-unit complex at 5805 Charlotte Drive, for $322.8 million. This transaction reflects a price of about $496,500 per unit.

In September, the ViO apartment complex, located at 5700 Village Oaks Drive, was sold for $100 million, translating to approximately $427,400 per unit. These figures indicate a budding strength in South San Jose’s apartment market, contrasting sharply with the challenges faced by numerous multifamily residential properties across the Bay Area.

High interest rates have compounded the difficulties for property owners, making refinancing existing loans a significant hurdle. As a result, an increasing number of multifamily residential properties are falling into default, particularly in Oakland.

The evolving situation surrounding The Neo at First serves as a reminder of the financial challenges in the current real estate market, highlighting both the opportunities and risks that investors must navigate. As the auction date approaches, the outcome will be closely monitored by stakeholders in the San Jose real estate sector.