SAN JOSE — A court receiver has seized control of an empty and neglected San Jose office building that’s delinquent on its loan, fresh evidence that economic woes still afflict the commercial property market.
The receivership status of the office building, located at 3100 North First Street, is part of a process that would shove the property info foreclosure on its loan, documents on file with the Santa Clara County Recorder’s Office show.
Santa Monica-based Vista Investment Group owns the building, which at one point was leased to Nio USA, a unit of a China-based maker of electric vehicles. Nio vacated the building in October 2023, according to documents on file with the San Francisco County Superior Court.
The San Francisco County court authorized the receiver to take over the maintenance and care of the building and to attempt to find a tenant for the property, according to a Jan. 30 order signed by county Judge Charles Haines.
The office building totals 99,400 square feet and is located on a prime spot at the corner of North First Street and Montague Expressway.
Soaring office vacancy rates and a sluggish demand from tenants could make leasing the building tricky.
At the end of 2023, 19.5% of the office space in Silicon Valley was available for direct lease or sublease, according to Colliers, a commercial real estate firm. That’s worse than the end of 2022 when 16.2% of Silicon Valley’s office space was available for lease or sublease, as Colliers reported at the time.
East-West Bank provided $25 million in financing for the 3100 North First building in 2018, the Santa Clara County documents show. The bank filed a lawsuit against building owner Vista Investment Group as part of the foreclosure process.
The loan became delinquent in October 2023, the county records show. As of Dec. 28, Vista Investment owed $24.3 million on the financing, including principal, interest, late fees and penalties.
In addition to the delinquency on the loan, the owner of the building has allowed certain elements of the structure to lurch into neglect, according to documents filed in San Francisco County court.
Among the problems at the 3100 North First building, according to the court records:
— The elevator in the office building was stuck on the second floor and needed to be serviced.
— The fire system was operational and being monitored, but an updated contract for the monitoring services needed to be updated, or the monitoring would cease.
— A burglar alarm system needed to be obtained for the building.
— The card access system was not fully functional and needed to be repaired.
— The fire sprinkler system was operational but needed to be serviced to conduct periodic tests.
Nio USA began renting the building in August 2018. Nio’s lease ended in October 2023 and wasn’t renewed. That was the same month the building owner allowed the property loan to topple into delinquency.
Nio USA advised Vista Investment Group in August 2022 that the electric vehicle maker intended to exit the property upon the conclusion of the lease and wouldn’t be renewing or extending its occupancy.
When told by Nio USA that it wouldn’t be continuing as a tenant, Vista Investment Group distributed $2 million in rent to the real estate firm’s equity investors and affiliates, according to the San Francisco county court records.
This decision by Vista Investment Group “clearly impacted on the borrower’s ability to now pay for these essential services which are necessary to protect and preserve the property,” representatives of East West Bank stated in the court records, referring to the stuck elevator and the difficulties with the fire, burglar alarm and other systems.
It wasn’t immediately clear whether the issues of neglect involving the building have been remedied.
“Plaintiff (East-West Bank) and its officers, employees and agents shall have immediate access to the property to enable them to view and inspect the property for purposes of appraisal,” the San Francisco court order stated.
Source: www.mercurynews.com