In 2014 and 2015, Chinese real estate development company Z&L Properties jumped into the California market with a splash, going on a buying spree that would eventually include 12 housing sites in the Bay Area and Los Angeles that, when built out, would yield 3,400 condos.

The portfolio of valuable land — most of the parcels had already been approved for development — included San Francisco sites in the Transbay area, Hayes Valley, Mid-Market and South of Market. It contained four sites in San Jose, including the 643-unit Silvery Towers development downtown and two high-rises with 708 condos on the former Greyhound bus storage yard.

There were additional sites in Los Angeles, Santa Clara and Marin County. Z&L Properties, a U.S. spin-off of the Chinese giant R&F Properties, was “destined to become California’s premier condominium developer,” the company website stated at the time.

That hasn’t exactly happened. Instead, years after the sites were purchased, none of the projects has been completed, and several have been derailed by lawsuits, cost overruns and building code violations. One project has been delayed because it is no longer economically feasible. Another was started in September 2017 and then construction was abruptly shut down after the site had been excavated. Another has been under construction for five years — three times longer than it should have taken — and still is not finished.

At a time when the city is facing a historic housing shortage, the difficulties that Z&L Properties has encountered illustrate the challenges many developers are grappling with. Construction costs, which have doubled since Z&L acquired most of its sites, are too high to make some projects economically viable.

Lenders have become more conservative, requiring developers to invest a lot more of their own money before a loan is approved. San Francisco’s permit process is notoriously slow, with projects stalling for months between the Department of Building Inspections and other agencies that must sign off on plans, including Public Works and the Fire Department.

But Z&L’s rocky entry into the world of Bay Area development also shows the rude awakening that some Chinese developers have experienced in San Francisco, where the planning and building requirements are far more restrictive than in their home country boomtowns. The problem is made worse by government restrictions on investment money leaving China.

555 Fulton St., a 139-unit condo building in Hayes Valley, has been under construction for almost five years, three times longer than it would normally take to build four stories of condos above retail.

During that time Z&L has run afoul of city planners, neighbors and elected officials. Dozens of buyers who had signed up for units walked away, as did its anchor retail tenant, grocer New Seasons of Oregon. Dozens of complaints about the project have been filed with the city’s Department of Building Inspection, most of them alleging that the developer regularly started construction work as early as 5:15 a.m. — well before the city’s legal start time of 7 a.m.

Much of the delay was caused by the developer redesigning the building’s exterior, without city permission, after it had been approved. The builder was forced to go back to the approved — and more expensive — glass exterior, which caused more than a year of delays.

Robert Buckner, chief financial officer of Z&L Properties, said the project is “finalizing construction” and the developer hopes to get its temporary certificate of occupancy by the end of March, “weather permitting.” He said Z&L is negotiating with a new grocer and that he expects a lease to be signed this quarter.

But in the demanding world of San Francisco politics, it may not be that easy. The new grocer will have to pass muster with the neighborhood and commit to the same requirements that New Seasons did — namely, offering what the city defines as affordable groceries — and also to hiring locally, District Five Supervisor Vallie Brown said.

Brown said the developer should not get its temporary certificate of occupancy until a lease has been signed for an affordable grocery store. Mayor London Breed, who represented the neighborhood before she was elected mayor, had worked to bring a full-service grocery store to the neighborhood, recruiting New Seasons to the site and sponsoring legislation that exempted the property from a law that bans retail chains in Hayes Valley.

Brown said that the exception granted to the ban on formula retail — in essence, chain stores — has expired and that she wants to see a grocery store lease and the project completed before it is renewed.

“They have been so hard to work with — the exemption (to the chain store ban) has been our bargaining tool,” Brown said. “It’s been a struggle, and we are waiting to see what happens.”

Hayes Valley Neighborhood Association President Gail Baugh also said the city should not give the developer a temporary certificate of occupancy if there is no deal with a grocer. After more than five years of tolerating noisy construction and losing valuable street parking, the residents are not likely to give Z&L the benefit of the doubt.

“We have been advised a number of times of deadlines, and none of them are ever met,” she said. “We were told the building would be completed by last September. We were told there would be a lease with a new grocery store. We don’t believe or trust this developer to follow through on promises they make to the community.”

Not far from 555 Fulton St. is another another Z&L-owned site: 1554 Market St., just west of Van Ness Avenue. There Z&L excavated a foundation in September 2017, only to abruptly halt construction because, the company now says, costs came in $10 million over earlier estimates.

“The project unfortunately became economically unfeasible, and no lender would fund it,” said Buckner, who added that the group is in talks with a new contractor that “has come in with a more reasonable construction budget.”

Construction costs in San Francisco have more than doubled in five years — the average cost of building a new home in San Francisco is now more than $700,000, and it is even higher for high-rise buildings like the 325 Fremont St. project, which is approved for 118 condominiums in 25 stories. While the building permit for that project was obtained in September 2017, it doesn’t work economically now and there is no timetable to start construction, Buckner said. Currently, it’s a vacant lot.

The significant increases in construction costs have far outpaced the amount that developers can pass on to people who buy the new units, Buckner said. “These cost increases have caused projects that once penciled out just a few years ago to be put on hold.”

Darlene Chiu Bryant, executive director of ChinaSF, a group that works in partnership with city government to connect Chinese and American investors, said Z&L Properties’ problems stem from a combination of bad advice, bad timing and cultural differences.

“The majority of the Chinese developers have been challenged in that they are taking whatever customs and methods they have in China and bringing them over here,” she said. “That’s been our biggest challenge: getting them to understand that business is done differently in S.F. and the USA. The ways of doing business in China don’t work here. It’s been a big learning curve, especially if they decide to be their own general contractor.”

Problems are multiplying for other Chinese developers, who have been among the most aggressive purchasers of downtown urban sites on both U.S. coasts over the past half-dozen years. Chinese investment in U.S. companies and real estate soared from less than $1 billion per year before 2008 to $46 billion in 2016, according to a 2018 report from the National Committee on U.S.-China Relations and the Rhodium Group, an independent researcher.

That number tumbled to $29 billion in 2017, and even fewer deals were announced in 2018. Meanwhile, with the Chinese government restricting investment in the U.S., companies invested in development deals here have been running into cash flow issues. Oceanwide, a developer constructing the largest projects under construction in both downtown San Francisco and downtown Los Angeles, recently shut down its $1 billion Oceanwide Plaza L.A. project temporarily because of a lack of liquidity.

Construction at the San Francisco development, the $1.6 billion Oceanwide Center at First and Mission streets, is still going on, although the developer has been looking for a short-term loan or a new capital partner, according to real estate sources.

Anchor Pacific Capital Managing Partner Anton Qiu, who works with many Asian investors, said he could not comment specifically on the Oceanwide or the Z&L situation. But he said Chinese government restrictions on money leaving the country over the past 18 months have forced some Chinese developers to sell sites outright or bring on new capital partners.

“Projects like these have long cycles and are financed with short-term loans,” Qiu said. “It’s a big problem. You have five-year projects, and the developers assumed the money would come out of China to support it. Now the money has been cut off.

“It’s the opposite of four years ago.”

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen