MOUNTAIN VIEW — A lender has foreclosed on a South Bay Area technology campus once touted as an “exquisite” property, one other sign that the Bay Area office market is facing an economic spiral.
The office complex on the corner of 350 and 380 Ellis Street in Mountain View was acquired by a subsidiary of KKR Real Estate Finance Trust, which is managed by New York investment giant KKR & Co. Inc.
According to a public document the corporate filed with the U.S. Securities and Exchange Commission on July 22, KKR Real Estate puts the present value of the South Bay office campus at $120.6 million. KKR Real Estate said it invested this amount to amass the technology campus on Ellis Street.
The $120.6 million that KKR invested in the acquisition of the technology campus is an incredible 66 percent lower than the $357.6 million that an alliance of investment giant Goldman Sachs and Bay Area real estate firm TMG Partners paid to purchase the office complex in 2021.
In other words, the technology campus on Ellis Street is now value only a 3rd of what it was when Goldman Sachs and TMG bought the property almost exactly three years ago.
KKR Real Estate Finance Trust acquired title to the property through a deed of conveyance in lieu of foreclosure. The documents were filed with the Santa Clara County Registry of Deeds on July 2.
TMG Partners, considered one of the Bay Area's most experienced and completed real estate firms, will now work with KKR to reposition the complex and create a unified and self-contained campus environment within the office center, the 2 corporations said.
According to TMG Partners, the office complex has a complete area of around 449,000 square meters. In 2021, Goldman Sachs and TMG bought the property from tech security company NortonLifeLock.
KKR Real Estate Finance Trust provided the alliance of Goldman Sachs and TMG Partners with $200 million to finance the four-building office campus.
In 2023, KKR Real Estate Finance executives began signaling to Wall Street analysts and investors that the loan was in poor condition and the lender might must take steps to handle the difficulties.
The financial problems plaguing the technology campus in Mountain View are only a brand new, ominous indicator of the economic difficulties of the Bay Area office market.
Starting in 2022, technology corporations began drastically downsizing their workforces and reducing their need for office buildings.
This dynamic has caused office emptiness rates to rise to record highs while rents have stagnated and even fallen.
This, in turn, has led to a lack of revenue for office constructing owners and has made it tougher – and fewer viable – to pay the monthly mortgages on the properties.
Some office owners have simply returned their office buildings to their lenders without objection.
When Goldman Sachs and TMG teamed up to buy the Ellis Street office campus, the property was praised highly in a marketing brochure.
The office campus at 350 and 380 Ellis Street served because the headquarters of NortonLifeLock, which is now based in Arizona.
The Mountain View technology office campus is described within the brochure as an “exquisite” headquarters complex on Ellis Street, the brochure said.
Newmark business real estate managers Jon Mackey, Mike Saign and Phil Mahoney are leading marketing and leasing efforts for the office campus.
The campus already offers quite a few amenities, including open work environments, large meeting rooms, kitchen and break areas, and customary rooms.
The office complex also contains a full-service gastropub restaurant and cafeteria, a tennis court, a beach volleyball court and diverse outdoor terraces.
In addition, KKR and TMG are planning further modernizations as a part of the repositioning of the campus.
“Planned renovations include a new fitness center, indoor and outdoor café, rooftop workspace and an enhanced 2.5-acre outdoor recreation area with a dedicated outdoor workspace,” TMG and KKR said.
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