Mortgage woes underscore feeble Bay Area office sector
SUNNYVALE, Calif. — A large office complex in Sunnyvale has gone into loan default, a financial setback that suggests post-coronavirus maladies continue to plague the Bay Area’s commercial real estate market.
Horizon Sunnyvale, a remodeled office complex on Oakmead Parkway, is in default on its mortgage and may face loan foreclosure, according to documents filed with the Santa Clara County Recorder’s Office.
According to a marketing flyer distributed by property owner Embardero Capital Partners and commercial real estate brokerage Newmark, the office complex consists of four interconnected buildings totaling 181,200 square feet.
According to county real estate records, the delinquent financing totals $63.5 million and was provided by lender LoanCore Capital REIT in 2019.
The financial difficulties are a new example of the unexpected and cataclysmic economic woes caused by the coronavirus’s emergence in early 2020.
In 2016, Embarcadero Capital purchased the large three-story office complex. Embarcedro Capital, one of the Bay Area’s most prestigious and experienced real estate firms, began a comprehensive modernization of the buildings in 2020.
The Sunnyvale office center was renovated at a time when coronavirus fears prompted a flurry of companies to reconsider how office space should be organized.
To promote wellness and a healthy work environment, the modernized campus includes flexible spaces and offices with easy access to outdoor areas. The property is geared toward tech companies looking for creative places to work.
However, severe economic challenges have emerged for the Bay Area office market as a result of the tech industry cutting jobs in the region and companies shrinking their work footprints.
Furthermore, an uneven return to work following the end of business shutdowns to combat the spread of the coronavirus has unleashed additional fierce headwinds for the Bay Area office market.
Office vacancies have risen, tech companies have decided to terminate or not renew their leases, and many office spaces are being offered for sublease as companies leave those locations.
Loans have matured and come due in some cases, forcing office building owners to face the daunting prospect of replacing an expiring loan with a new mortgage at a sky-high interest rate.
Due to these additional complications, an increasing number of Bay Area office buildings have experienced loan defaults and foreclosure proceedings.