A high-profile San Jose apartment tower faces legal and financial pressure on two fronts, as its general contractor has moved to force the owner into involuntary bankruptcy just as the building heads toward possible foreclosure, The Mercury News reported.
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Suffolk Construction has filed a Chapter 7 petition against two real estate firms, Scape and Morro USA, the developers behind The Fay, a 23-story tower at 10 E. Reed St. in downtown San Jose. Suffolk looks to recoup $9.3M in fees for completed work on the tower that the owner allegedly failed to pay.
The filing lands as the property faces foreclosure tied to a $182.5M construction loan, which went into default in July.
An affiliate of the UK-based Scape purchased the property for $16.5M in 2020. In 2021, Scape, which focuses primarily on student housing, obtained construction financing for the residential tower. Morro, a US-based subsidiary of Scape, developed the property.
Neither Suffolk nor Morro responded to Bisnow’s request for comment.
When it opened in December 2024, San Jose had staked hopes on The Fay to revive a flagging downtown. Meanwhile, San Jose’s broader multifamily market showed signs of renewed investor interest.
Earlier this month, the 160-unit Atrium Garden sold for $18.5M in North San Jose. In August, Greystar sold the 948-unit Park Kiely complex for $370M. It was the largest apartment acquisition in Santa Clara County so far in 2025. Earlier in the summer, Post Glen Group and Affordable Housing Access bought a south San Jose apartment complex for $61M.
San Jose’s multifamily vacancy rate ticked up in the third quarter to 3.5%, while rent grew by 3.2%, according to CBRE. The average sale price per unit dropped to $400K.
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