3100 North First Street, a north San Jose office building. (Google Maps)
SAN JOSE — A big and empty San Jose office building that has tumbled into neglect — including a defunct fire alarm system — faces receivership and a loan foreclosure as the Bay Area’s commercial property woes worsen.
The office building, located at 3100 North First Street, is in default on its loan and could be seized by its lender, according to documents filed on Jan. 4 with the Santa Clara County Recorder’s Office.
The default problems that confront the building, which totals 99,400 square feet, provide fresh evidence that financial woes continue to jolt the Bay Area office market in the wake of the coronavirus outbreak.
Santa Monica-based Vista Investment Group owns the building, which at one point was leased to Nio USA, a unit of a China-based maker of electric vehicles. The building is currently empty. Nio vacated the building in October 2023, according to documents on file at the San Francisco County Superior Court
Nio USA at one point also occupied an adjacent building on North First Street, but those offices are now empty.
In 2018, East West Bank provided to Vista Investment Group $25 million in financing for the 3100 North First office building, according to the Santa Clara County property files.
The loan became delinquent in October 2023, the county records show. As of Dec. 28, Vista Investment owed $24.3 million on the financing, including principal, interest, late fees and penalties.
In addition to the delinquency on the loan, the owner of the building has allowed certain elements of the structure to lurch into neglect, according to documents filed in San Francisco County court.
Among the problems at the 3100 North First building, according to the court records:
— The elevator in the office building was stuck on the second floor and needed to be serviced.
— The fire system was operational and being monitored, but an updated contract for the monitoring services needed to be updated, or the monitoring would cease.
— A burglar alarm system needed to be obtained for the building.
— The card access system was not fully functional and needed to be repaired.
— The fire sprinkler system was operational but needed to be serviced to conduct periodic tests.
Nio USA began renting the building in August 2018. Nio’s lease ended in October 2023 and wasn’t renewed. That was the same month the building owner allowed the property loan to topple into delinquency.
Now, East West Bank has requested that the court appoint a receiver to oversee the maintenance and operation of the building, as well as all the finances of the empty property.
Nio USA advised Vista Investment Group in August 2022 that the electric vehicle maker intended to exit the property upon the conclusion of the lease and wouldn’t be renewing or extending its occupancy.
When told by Nio USA that it wouldn’t be continuing as a tenant, Vista Investment Group distributed $2 million in rent to the real estate firm’s equity investors and affiliates, according to the San Francisco county court records.
This decision by Vista Investment Group “clearly impacted on the borrower’s ability to now pay for these essential services which are necessary to protect and preserve the property,” representatives of East West Bank stated in the court records, referring to the stuck elevator and the difficulties with the fire, burglar alarm and other systems.
This news organization reached out by email and telephone to attempt to obtain a comment from Vista Investment Group executives regarding the circumstances associated with the loan default. Vista Investment didn’t immediately provide a comment.
When lenders seize a property through a foreclosure proceeding, the financier typically prefers that the property is in relatively good condition. Why? Lenders typically seek at some point to sell a property to a buyer.
East West Bank representatives expressed concern about the condition of the property if a receiver isn’t appointed to oversee the neglected structure.
“The property may be subject to damage or vandalism,” Bruce Lofgren, a first vice president with East West Bank, stated in a court filing regarding 3100 North First Street.
Originally published at George Avalos