SAN JOSE — A big north San Jose office building might dodge foreclosure if a federal judge approves a bankruptcy plan that’s being floated to reorganize the empty property’s feeble finances.
Despite the attempt at financial rescue, property values for office buildings continue to erode in the Bay Area, court papers filed in this bankruptcy case suggest.
The default and bankruptcy are reminders that economic conditions in the years following the coronavirus outbreak remain wobbly at best for office buildings in the Bay Area.
The office building is located at 10 West Tasman Drive in north San Jose and totals 105,000 square feet.
In December 2023, the office building flopped into default due to delinquency on a $29 million loan that Copia Lending provided in 2021 to the owner of the building, Santa Clara County property records show.
San Jose-based Heritage 10 West Tasman LLC owns the office building. Executives involved in the ownership or management of the building include Ji Wan Jung, Sung Hong, Samyang Development, Doo Pyo Lee, Daehyun Kang, Ji Young Kim and David Jankowitz, U.S. Bankruptcy Court records show.
Copia Lending had intended to auction off the office building through a foreclosure proceeding in April 2024. In the same month, though, the building owner fended off the foreclosure — for now — through the bankruptcy filing.
The building’s owners hope to stabilize the property’s financing through funds provided by Legalist Inc., a firm that invests in an array of assets, including struggling or bankrupt real estate sites. Legalist’s clients include big investors such as endowments, foundations, hospitals, insurance companies, and high-net-worth families.
The building owner intends to borrow $24.8 million from Legalist. These funds will be used to pay off Copia and numerous other creditors.
“This (reorganization) plan proposes to refinance the property,” the bankrupt property owner stated in a court filing on July 2.
It appears the building’s value has nosedived in recent years, court papers show.
As of January 2024, the office building’s value was $51.3 million, documents on file with the Santa Clara County Assessor’s Office show.
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However, the current fair market value is $21.5 million, an exhibit filed with the reorganization plan shows. The building’s owner paid $30 million to buy the property in 2021, according to the bankruptcy court records.
This means the estimated fair market value is roughly 58% below the assessed value — less than half of the value assigned by county officials.
“The debtor (building owner) was not able to lease the property in a timely manner,” the court filing shows.
Global and local economic calamities coalesced to wipe out the office building’s financial foundation.
“The pandemic and prolonged more rigorous lockdowns in California as well as the time it took for the businesses to wind down on remote working and revert to a traditional working environment” undermined tenant interest in the building, the property owners stated in court filings.
