SUNNYVALE — A big — and empty — office campus in Sunnyvale that has flopped into a default on its loan could be replaced by a large housing development whose approval could proceed through a “builder’s remedy” gambit.
The housing development would consist of 315 residential units, Sunnyvale planning documents show.
The lender for the delinquent financing, LoanCore Capital REIT, which provided a 2019 loan totaling $63.5 million, has proposed the housing development.
Sares Regis Group of Northern California, a major residential developer, is working with the lender on the proposed development, according to documents on file with Sunnyvale city officials.
The property has addresses of 1230, 1250, 1270 and 1290 Oakmead Parkway in Sunnyvale.
The financial difficulties serve as a fresh example of the unforeseen and cataclysmic economic woes spawned by the onset of the coronavirus in early 2020.
The attempt to replace the offices with housing, though, also reflects new ways that real estate firms seek to overcome the financial difficulties presented by the aftermath of the coronavirus outbreak.
Of the 315 units, 252 would be market-rate townhouses and 63 would be affordable apartments set aside for low-income residents.
An estimated 15 of the buildings would be townhouse units. One building would be a multifamily apartment complex, the documents show.
The existing office buildings would be demolished to pave the way for the new houses. The office complex consists of four interconnected buildings and totals 181,200 square feet, according to a marketing flyer distributed by property owner Embardero Capital Partners.
The notice of default was filed regarding the property’s loan in early November, Santa Clara County Records show.
Embarcadero Capital bought the big three-story office complex in 2016. In 2020, Embarcedro Capital, one of the Bay Area’s top-notch and veteran real estate firms, launched a complete modernization of the buildings.
The revamp of the Sunnyvale office center occurred at a time when tech companies were engaged in big expansions of their footprints.
Soon after the renovation was completed, however, coronavirus-linked fears prompted a flurry of companies to rethink how their office spaces should be structured.
Plus, severe economic challenges have emerged for the Bay Area office market in the wake of the tech industry chopping jobs in the region and companies cutting back the size of their work footprints.
Plus, an uneven return to work even after the end of business shutdowns to combat the spread of the coronavirus has unleashed additional fierce headwinds for the office market in the Bay Area.
These unprecedented shifts in the economy have prompted a growing number of real estate firms to ponder and attempt drastic new strategies to unlock some value from their empty office buildings.
Among the gambits: proposals for housing projects to replace office buildings.