Silicon Valley tech campus is foreclosed as office market staggers

MOUNTAIN VIEW — A lender has seized through foreclosure a South Bay tech campus once touted as an “exquisite” property in a fresh sign that an economic whirlpool menaces the Bay Area office market.

The office campus, located at 350 and 380 Ellis Street in Mountain View, was seized by an affiliate of KKR Real Estate Finance Trust, which is managed by New York City-based investment behemoth KKR & Co. Inc.

Buildings that are part of an office campus at 350 and 380 Ellis Street in Mountain View. (Google Maps)

KKR Real Estate places the current value of the South Bay office campus at $120.6 million, according to a public document the company filed on July 22 with the Securities and Exchange Commission. KKR Real Estate reported that it invested that sum to take ownership of the tech campus on Ellis Street.

The $120.6 million that KKR invested to buy the tech campus is a jaw-dropping 66% less than the $357.6 million that an alliance of investment behemoth Goldman Sachs and Bay Area real estate firm TMG Partners paid in 2021 to buy the office complex.

Put another way, the Ellis Street tech campus is now worth just one-third of its value at the time Goldman Sachs and TMG bought the property almost exactly three years ago.

The KKR Real Estate Finance Trust took ownership of the property through a deed in lieu of foreclosure, documents filed on July 2 with the Santa Clara County Recorder’s Office.

The office complex totals about 446,000 square feet, according to information that TMG and Goldman Sachs released in 2021 when the alliance bought the property from tech security firm NortonLifeLock.

KKR Real Estate Finance Trust provided the Goldman Sachs and TMG Partners alliance $200 million as financing for the five-building office campus.

In 2023, KKR Real Estate Finance executives began to signal to Wall Street analysts and investors that the loan was in lousy shape and that the lender might have to take steps to deal with the difficulties.

The financial woes that afflict the Mountain View tech campus are merely an ominous new indicator of the economic troubles for the Bay Area office market.

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