China property tycoon Zhang Li arrested on US bribery charge

A real estate tycoon whose China-based development firm has proposed Bay Area projects, including some in downtown San Jose, was detained in England over a San Francisco corruption probe.

Zhang Li, a principal executive with Z&L Properties and co-chairman and chief executive officer of Guangzhou R&F Properties, was detained in connection with a U.S. investigation into possible kickbacks and bribery involving a project in San Francisco.

A court in London was told this week that Zhang was wanted in the United States over an investigation into the payment of bribes to San Francisco city officials linked to the granting of permits for a project in that city, according to published reports, including one from Reuters.

R&F Properties acknowledged that legal proceedings were underway involving Zhang, the company stated in a filing with securities regulators in Hong Kong.

“The company notes that there are media reports concerning the grant of bail to Mr. Zhang Li, a director of the company, by a court in London in connection with a case pending in the United States that involved Z&L Properties,” Guangzhou R&F Properties said in the regulatory filing.

R&F Properties distanced itself from Z&L Properties, even though the filing lists Zhang as an “executive director” of R&F. Zhang is also a co-founder of R&F Properties, according to the company’s website.

“The company wishes to clarify that it did not provide any security money for the bail, it has no interest in Z&L Properties (which is owned by Mr. Zhang Li and his affiliate), and the case will not have any material adverse impact on the company’s business and operations,” R&F stated in the filing.

Z&L Properties, whose principal executives include Zhang, has proposed multiple housing towers in downtown San Jose and one mixed-use development in San Francisco.

Among the San Jose projects that Z&L Properties, which is based in China and has a Foster City office, has proposed:

  • Two residential towers at 188 W. St. James St. in San Jose have been built but are only partly occupied. The towers total 640 units, consisting of roughly 320 units in each tower.
  • A pair of housing high-rises and the revamp and rescue of a historic church at 252 N. First St. in San Jose. Neither tower has been built, and the old church is covered by a sometimes-tattered black tarp.
  • A project of two housing towers that would replace a former Greyhound terminal at 70 S. Almaden Ave. This project has been delayed to the extent that a key permit has expired on the proposed development.

In 2021, Z&L Properties yielded ownership of one of its development sites, a 1.6-acre property near the corner of Terraine Street and Bassett Street. Z&L’s plans for a big residential tower at that location had stalled.

An alliance led by global developer Westbank, local developer Gary Dillabough and San Jose-based Terrascape – a company headed by real estate veterans Tony Arreola and Mark Lazzarini – paid $11.4 million for the choice parcel. The property is in a downtown district known as the North San Pedro neighborhood.

In the case of the one downtown San Jose project that Z&L has been able to complete, one of the towers is empty and the other is gradually adding occupants as people buy condominium units in the high-rise.

“I think they (Z&L) will sell the properties quickly,” said Bob Staedler, principal executive with San Jose-based Silicon Valley Synergy, a land use consultancy.

Sales could be a welcome change for downtown San Jose, since the undeveloped sites that Z&L still owns have stumbled into a cycle of neglect. New owners could create updated property values for the sites and properties that are similar.

“It is good news for the development community to reset price expectations,” Staedler said.