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Office campus at 350 and 380 Ellis Street in Mountain View.
MOUNTAIN VIEW — A lender has seized through foreclosure a South Bay tech campus once touted as an “exquisite” property in fresh sign of the economic troubles facing the Bay Area office market.
The office campus, located at 350 and 380 Ellis Street in Mountain View, was seized by an affiliate of KKR Real Estate Finance Trust, which is managed by New York City-based investment behemoth KKR & Co. Inc.
Lobby area and workspaces within an office campus at 350 and 380 Ellis Street in Mountain View. (TMG Partners)
KKR Real Estate places the current value of the South Bay office campus at $120.6 million, according to a public document the company filed on July 22 with the Securities and Exchange Commission. KKR Real Estate reported that it invested that sum to take ownership of the tech campus on Ellis Street.
The $120.6 million that KKR invested to buy the tech campus is a jaw-dropping 66% less than the $357.6 million that an alliance of investment behemoth Goldman Sachs and Bay Area real estate firm TMG Partners paid in 2021 to buy the office complex.
The Ellis Street tech campus is now worth just one-third of its value at the time Goldman Sachs and TMG bought the property almost exactly three years ago.
The KKR Real Estate Finance Trust took ownership of the property through a deed in lieu of foreclosure, according to documents filed on July 2 with the Santa Clara County Recorder’s Office.
TMG Partners, one of the Bay Area’s veteran and savvy real estate firms, will now work with KKR to reposition the complex and create a unified and self-enclosed campus environment at the office hub, the two companies said.
The office complex totals about 449,000 square feet, according to TMG Partners. In 2021, Goldman Sachs and TMG bought the property from tech security firm NortonLifeLock.
KKR Real Estate Finance Trust provided the Goldman Sachs and TMG Partners alliance $200 million as financing for the four-building office campus.
In 2023, KKR Real Estate Finance executives began to signal to Wall Street analysts and investors that the loan was in lousy shape and that the lender might have to take steps to deal with the difficulties.
The financial woes that afflict the Mountain View tech campus are merely an ominous new indicator of the Bay Area office market’s economic struggles.
Defaults on financing for office properties are on the rise in numerous Bay Area markets and a growing number of office buildings have toppled into foreclosure due to loan delinquencies.
Starting in 2022, tech companies began to slash the size of their workforces and curbed their appetites for office buildings.
This dynamic has sent vacancy levels to record heights for office buildings while rental rates have flattened or drifted lower.
That in turn has slashed revenue for office building owners, making it tougher — and less justifiable — to pay the monthly mortgage on the properties.
Some office owners have simply given office buildings back to their lenders without a contest.
At the time Goldman Sachs and TMG teamed up to buy the Ellis Street office campus, a marketing brochure described the property in glowing terms.
The 350 and 380 Ellis Street office campus at the time served as the headquarters of NortonLifeLock, which is now based in Arizona.
The Mountain View tech office campus was described in the brochure as an “exquisite” headquarters complex on Ellis Street, the brochure stated.
Newmark commercial real estate executives Jon Mackey, Mike Saign and Phil Mahoney are leading the marketing and leasing efforts for the office campus.
The campus already offers plenty of amenities, including open work environments, big meeting rooms, kitchen and break areas and collaborative spaces.
The office complex also features a full-service gastropub restaurant and cafeteria, a tennis court, a sand volleyball court and numerous outdoor patios.
KKR and TMG are also planning further upgrades as they reposition the campus.
“Planned renovations include a new fitness center, an indoor/outdoor cafe, workplace roof decks, and an improved 2.5-acre outdoor amenity zone with a dedicated fresh-air workspace,” according to TMG and KKR.
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This article was originally published by a www.mercurynews.com . Read the Original article here. .