SAN JOSE — A San Jose building seized through foreclosure has landed on the sales block, a potential deal that may provide clues about the strength — or weakness — of the office market.
The development, located just south of downtown San Jose, was never completed and toppled into a loan default and eventual foreclosure, raising questions about the prominent property’s future.
Now, Meacham Oppenheimer, a commercial real estate firm, is attempting to sell the office and retail complex on behalf of its current owner, the lender for the property.
“We are showing the property regularly now,” said David Taxin, a principal executive and partner with Meacham Oppenheimer. “We have gotten fairly good interest from buyers.”
The two-building complex totals about 15,500 square feet and occupies a very visible site next to a busy stretch of Monterey Highway between Umbarger Road and Lewis Road.
The developer and prior owner of the complex had obtained $6 million in financing in 2019 from lender Secured Income Fund II, documents filed with the Santa Clara County Recorder’s Office show.
The developer was a group led by San Jose-based real estate executive Adeel Mahmood, according to the property records.
In May 2021, the lender filed a notice of default, a document that stated the developer was delinquent on the $6 million in financing that Secured Income had provided.
Secured Income Fund II, the San Jose-based lender, took ownership of the property through a foreclosure proceeding that was completed in January 2022, county records show.
The lender paid $1 million to take control of the retail building, even though the unpaid debt, including finance charges, late fees and penalties, totaled $7.2 million at the time of the foreclosure, according to the property documents.
At one point, Mahmood attempted to sell the office and retail building, whose exterior was completed in recent years but the interiors were never finished.
In Taxin’s view, though, Mahmood was offering the office and retail building at too high a price for the market.
The economic woes unleashed by the coronavirus complicated sales efforts for the property because office or retail buildings are now generally perceived as less valuable than before the outbreak of the deadly bug.
“The prior owner was probably attempting to sell it for $500 to $600 a square foot,” Taxin said. “We want to sell it for about $350 to $375 a square foot.”
That could work out to a decline of roughly 25% to 42% in the value of the property.
The lender has striped the adjacent parking lot, repaired broken windows and installed a fence around the site, according to Taxin.
“We would anticipate being able to sell this to an owner-user,” Taxin said
The two buildings in the complex each total about 7,750 square feet, he estimated.
“Restaurants, daycare, medical office, retail, we have numerous uses that could go into these buildings,” Taxin said.