Fresh start for Vietnam Town

January 23, 2009 by Katherine Conrad for San Jose Business Journal

Lap Tang, left, principal of TWN Investments, has restarted his San Jose project that stalled in mid-2007. Shown with him is site superintendent Troy M. Fisher

Vietnam Town, the massive retail project slated for east San Jose that was stalled for nearly two years, is back on track with a $10 million infusion of capital.
Originally scheduled for completion in late 2007, the 275,000-square-foot development ran into financing problems in mid-2007 when one of its lenders, East West Bank, walked away, putting a halt to construction at the 20-acre site on Story Road, according to Lap Tang, a partner with project developer TWN Investments.
Tang said the issues with the remaining banks, United Commercial Bank and EverTrust Bank, and its contractor, Reeve-Knight Construction Inc., were resolved in late December by bringing in more local partners who raised another $10 million for a project valued at $100 million.
“(The banks) wanted more equity,” he explained. “Now the loan has been funded. In the next 10 days, we’ll start framing.”
Louansee Moua, chief of staff for San Jose City Councilwoman Madison Nguyen, was surprised but pleased to hear that Tang was able to restart the project, given the current economic conditions.
“We’re happy it’s starting up again. We would love to see it finished versus it being in a bad situation,” she said. “Hopefully at the end of the year, we’ll have a new place to shop.”
It’s not the only iron Tang has in the fire. The developer is also discussing plans for a 16.5-acre site in Milpitas near the intersection of Interstate 880 and Highway 237 that he bought at the end of 2007 for $40-plus million. Tang said he would like to build a 750,000-square-foot project on the parcel known as Milpitas’ western gateway.
Diana Barnhart, economic development manager for Milpitas, said city staff is meeting with Tang to discuss the first steps in his plan to build a mixed-use center that includes 350,000-square-foot of retail shops plus office and housing at the aging mall, Serra Center, that was constructed in the 1960s. Barnhart said staff has encouraged Tang to begin doing traffic studies of the area before bringing the project before the Planning Commission and City Council.
“I think this is the perfect time to go through permit review so he will be in good stead when the economy comes back,” Barnhart said. “He’ll be in position to initiate development.”

Tang said he is considering building the same product in Milpitas as he is constructing in San Jose. Vietnam Town, located in the controversial neighborhood district only recently christened Little Saigon, will offer the market a slightly different type of retail model when it opens by the end of this year.
Capitalizing on the desire of Asian-Americans to own their real estate, Tang has structured the center as a retail condominium development in which he has sold the bulk of the roughly 200 units as 1,000-square-feet condos. About 80 units remain to be sold, several on the second floor of the three two-story buildings in the nine-building center that will include a multi-story parking garage.
Tang said he used the deposits on the condos, which so far have sold for $400,000 to $600,000 a unit, as collateral on the project’s loan. During the long delay when buyers wondered whether the project would be built, he was forced to refund some of the deposits. Fewer than 10 demanded their money back, he said; the rest were willing to wait.
The developer, who helped to build Grand Century Mall also on Story Road, was reluctant to disclose the two pages of conditions imposed by the banks, United Commercial Bank and EverTrust Bank. But before he could obtain the green light, he also had to resolve some red flags raised by subcontractors who filed mechanics liens totaling $2 million against TWN Investments. When the project was halted, only the sewer lines and foundations center were laid.
Also unpaid as of a year ago is contractor Reeve-Knight Construction of Roseville, which filed a lien against the property for $3.7 million. John Grey, vice president of operations for Reeve-Knight, said the issues have been resolved. He expects a crew of 50 to 200 people to be working on finishing the first phase of the three-phase project.
Although it’s not a huge project for his company, Grey said in this climate, “Any work is good work as long as people have the money to pay for it.”
Dylan Nguyen, a broker with the Milpitas-based GD Commercial, sold several condos to buyers who relish the idea of owning their own piece of the American pie. He noted that Vietnam Town is right next to the Grand Century Shopping Mall, a huge draw for Asian American families from San Jose, as well as Sacramento and San Francisco, that has become a popular hangout with its wide array of shops and eateries.
“This is very good for the community,” Nguyen said. “Everybody has been waiting patiently for two years for Mr. Tang to go through a lot of hurdles. But he won’t give up because he believes in the project. This is a landmark, and Asians love to own something in a landmark like this. This is a new legacy for Vietnamese.”
Given the economic turmoil, those contacted for this story expressed surprise that the development was once again under construction. Some expected the developers to abandon the project, but Tang said he never considered walking away.
“This is a landmark for the Vietnamese community — we already named it Vietnam Town,” he said. “I have been in business since 1979; everybody knows me. I cannot walk away. I had to finish it.”

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