Successes, setbacks emerge in deals from real estate empire
Uneven outcomes for defrauded investors in Silicon Sage properties
Attempts to find buyers for a fraud-riddled and insolvent Bay Area real estate empire have encountered some success, some setbacks — and plenty of uncertainty.
The completed and attempted property purchases arise from the implosion of the real estate holdings of Silicon Sage Builders and its principal executive Sanjeev Acharya. Both have been accused of fraud by the Securities and Exchange Commission,
An estimated 250 investors, many from the South Asian community, were defrauded in a complex array of development, property purchase and financing schemes crafted by Acharya and Silicon Sage Builders, an SEC complaint claims.
A federal judge has shoved Silicon Sage's properties into receivership. The court-appointed receiver, David Stapleton, has launched a quest to salvage value from the collapsed and bankrupt real estate empire by finding buyers for the properties. This way, investors can recoup at least some small amount of their losses.
Some sales have been successfully completed. In at least one case, however, a lender foreclosed on a Silicon Sage property, a transaction that wiped out the investors in that project.
The biggest setback so far for the receiver in his efforts to sell Silicon Sage properties appears to have surfaced with the failed attempt to sell an east San
Jose property before it was seized through a foreclosure.
The property, located at 2101 Alum Rock Ave. in San Jose, was recently auctioned off for $5.5 million. But instead of raising proceeds that could go to defrauded investors, the money went to the lender to pay off part of the mortgage for the site.
The receiver is making progress on the potential sales of properties in Fremont and Santa Clara, according to court papers filed on Feb. 18.
In Fremont, a property at 3780 Peralta Blvd. under contract to be bought for $23 million. The site is fully entitled for a mixed-use development.
If the purchase is completed, the transaction could create net proceeds of at least $2 million.
In Santa Clara, the receiver is attempting to sell office and retail condominium units on the ground floor of a mixed-use site at 1313 Franklin St. Deals have been struck for the purchase of six of the seven commercial units, but the purchases are yet to be completed.
These are the fully completed sales:
• A big apartment complex in downtown San Jose on Balbach Street that was sold for $53.5 million and raised net proceeds of $10.7 million.
• Three retail units on the ground floor of a condominium project on El Camino Real in Santa Clara, raising a net of $177,000.
• A commercial unit on the ground floor of a residential project on Mathilda Avenue in Sunnyvale, which netted $142,000.
• The sale of a singlefamily residence in Hayward, which generated net proceeds of $414,000.
• The sale of a residential development site at 42021 and 41965 Osgood Road in Fremont's Irvington district for $13.5 million. The deal generated net proceeds of $2.6 million.
The receiver is also attempting to complete the
construction of two condominium projects. One is at 42111 Osgood Road in Fremont, a 93-unit development called Savant at Irvington, and the other is a 91-unit complex at 1821 Almaden Road in San Jose called The Almaden.
“The court has approved the receiver's motion to complete construction on these projects and construction is in full swing,” the receiver stated in a court filing.
As an example of the enormous impact on investors, Charles Johnisee, an elderly retiree who is now 81, revealed in court papers that he lost millions of dollars to Acharya through the sale in 2020 of property at 2101 Alum Rock.
When a Johnisee family trust sold the property to Acharya's affiliate, instead of paying all $9 million to Johnisee in a straightforward manner, Acharya convinced Johnisee to conduct a convoluted deal whereby Johnisee received only a small amount from the Acharya-led affiliate at the time of the transaction.
“I am now 81 years old,” Johnisee stated in a November 2021 court filing. “The property comprised the bulk of my assets.” He also described the parcel as the “nest egg” for his wife and him.
Now that the primary property financier for the site, Parkview Financial, has sold the property to satisfy the mortgage on the Alum Rock site, nothing was left over for Johnisee and his wife. Johnisee stated in the filing that Acharya told him in 2020 that Johnisee had to provide financing or the property deal would fall through.
“My intent was to liquidate my interest in the property so that the proceeds would be available to me and my wife to cover our living expenses,” Johnisee stated in the court filing.
“The receiver's counsel is in the process of drafting a motion seeking approval of the receiver's recommended claims procedures and expects to file this within the next 60 to 90 days,” the Feb. 18 filing stated.
But the creation of a procedure to file claims and resolve them doesn't mean investors will immediately capture cash in the near future.
“It will be some time,” the court filing stated, “before the receiver is in a position to make distributions to investors and creditors.”