Lender seizes big San Jose office building in grim sign of market woes

SAN JOSE — A big office building in San Jose has been seized by its lender, despite a bankruptcy case that sought to ward off the foreclosure, in a sign of weaker property values and forbidding market conditions.

The lender for the building at 10 West Tasman Drive in north San Jose has grabbed the property at a price that points to a nosedive in the office site’s value, according to documents filed on Oct. 4 with the Santa Clara County Recorder’s Office.

The office building was bought for $23.7 million, the county real estate records show. That price was the value the lender placed on the building when it took ownership of the office hub.

In sharp contrast, the value of the building as of January 2024 was $51.3 million, according to the latest estimate from the Santa Clara County Assessor’s Office.

This means the amount paid by the lender to take over the building is a jaw-dropping 53.8% below the value calculated by the County Assessor’s Office. Copia Lending used an affiliate, West Tasman Drive 10, to take ownership of the building.

Commercial real estate’s slumping values are poised to become a widening challenge for Bay Area city, county, and regional agencies, as well as public school districts, that depend on property taxes for some or much of their revenue.

Lower prices for office, retail and hotel buildings might do more than slow gains for property tax revenue. The slumping values might even cause property tax revenue to decrease.

Either outcome could squeeze government coffers over the next year or so should the value slump persist.

The next steps for north San Jose’s 10 West Tasman building might provide part of the picture for commercial property values in the Bay Area.

Like so many office buildings in the Bay Area, the 10 West Tasman site has struggled financially.

The building, which totals 105,000 square feet, has been empty for years, according to documents on file in the U.S. Bankruptcy Court. It commands a prime location at the corner of West Tasman and North First Street next to or near light rail stations.

San Jose-based Heritage 10 West Tasman LLC had owned the building since 2021, when the entity bought it for $30 million. Executives involved in the ownership or management of the building included Ji Wan Jung, Sung Hong, Samyang Development, Doo Pyo Lee, Daehyun Kang, Ji Young Kim and David Jankowitz, U.S. Bankruptcy Court records show.

The ownership group filed for bankruptcy in a failed quest to ward off the foreclosure and loss of the building as well as its investment in the property.

The prior ownership group that lost the building through the foreclosure said it could never find a tenant for the large office property.

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 businesses to wind down on remote working and revert to a traditional working environment” undermined tenant interest in the building, the prior property owners stated in court filings.

Now, the lender that owns the building faces the forbidding challenge of attempting to find a buyer or a tenant for the building in a tough office market.

A potential buyer might demand an ultra-low price to buy the office complex and take it off the lender’s hands. This sort of outcome could drive its property value even lower.