SAN JOSE — An empty San Jose office building has been foreclosed and seized by its lender, a financial real estate failure that serves as a disquieting reminder of the maladies that afflict the frail Bay Area office market.
The building, located at 5729 Fontanoso Way in south San Jose, was seized by its lender, The Evergreen Advantage, through a foreclosure that valued the building at $24.5 million, documents filed on May 24 with the Santa Clara County Recorder’s Office show.
In a May 14 filing with a bankruptcy court in Florida, Evergreen Advantage stated that two recent appraisals placed the value of the building at even less than the lender’s winning bid in the foreclosure of $24.5 million.
The appraisals placed the value of the building at $21.8 million, which is 11% below the foreclosure value. Even worse, the court-referenced appraisals were 20.4% below the January 2023 County Assessor’s Office value of $27.4 million.
The assessor’s value precisely matches the $27.4 million the prior owner paid in 2022 to buy the 78,200-square-foot building.
Even with the varying property values for the building, one assessment seems certain: The building’s value is headed decidedly lower, a trend that is in keeping with the fading office market in the Bay Area.
In November 2023, Atlas Capital Investments, the group that had owned the building before losing it through foreclosure, filed for bankruptcy to ward off or delay the property seizure.
Atlas Capital, whose principal member is Lynne Bui, a Los Gatos-based medical professional specializing in oncology, eventually wasn’t able to head off the bankruptcy, a result that led to the foreclosure.
Two other entities headed by Bui, Elessar Properties and Global Cancer Research Institute, also have filed for bankruptcy.
Separately, Bui has also filed for bankruptcy, a Chapter 11 filing in 2023 that stated Bui had $58.1 million in liabilities, $18.8 million in assets and an income of $43,000 a month, which would equate to $519,600 a year.
An array of public records also indicate that real estate entities led by Bui could face foreclosure on properties in Berkeley and Los Gatos.
In 2021, Khloris Biosciences leased the 5729 Fontanoso Way building in San Jose. The Khloris website lists Bui as the co-founder and chief executive officer of Khloris. This means Bui was a principal executive for the tenant and the owner of the San Jose building in the years leading up to the foreclosure.
In 2018, Khloris Biosciences also raised $5 million in a venture funding round, according to the Crunchbase website. Neither Khloris nor Crunchbase referenced any subsequent funding rounds for the biotech firm.
The valuations for the building fit in with the ominous trends and numerous transactions documenting that office property values throughout the Bay Area have plunged over the last year or two.
Some Bay Area office buildings are being bought for only 10%, 20, or one-third of their prior values.
Tech industry layoffs accompanied by moves by many tech companies to slash their respective corporate footprints have coalesced to increase office space vacancies and caused office building values to nosedive.
The uneven pace for office employees to return to their workplaces after the coronavirus outbreak has also helped to undermine the Bay Area office sector.