Default, Foreclosure Looms over San Jose Office Building

SAN JOSE — A big San Jose office and research building has fallen into default on its real estate loan, highlighting the financial challenges faced by the Bay Area commercial property markets after the coronavirus.

The lender for the property, located at 5729 Fontanoso Way in south San Jose, has reported that the loan has become delinquent and is threatening foreclosure and seizure of the property, according to documents filed on July 18 with the Santa Clara County Recorder’s Office.

In May 2022, Atlas Capital Investments based in Saratoga purchased the building for $27.4 million. The building spans 78,200 square feet and occupies a 4.7-acre site.

During the transaction, Atlas Capital secured an $18.4 million loan from Evergreen Advantage to finance the purchase. Now, the loan is in default, according to the county documents.

Previously, the south San Jose building had been leased to Khloris Biosciences, a biotech company co-founded by Joseph Wu, director of the Stanford Cardiovascular Institute, and Lynne Bui, a South Bay oncologist, with the motto “a world without cancer” prominently displayed on their website.

In 2018, Khloris Biosciences raised $5 million in a venture funding round, as reported by Crunchbase. There is no information available about subsequent funding rounds for the biotech firm.

An in-person observation of the property on Tuesday revealed overgrown landscaping and garden areas, debris scattered throughout the building’s pathways and entrance, and a padlock on the front door. The lobby was deserted, and three vehicles were parked in the surface lot next to the building.

There were no obvious signs that Khloris Biosciences had ever occupied the offices, although a sign bearing the company’s name was taped to the doorway.

This news organization made multiple phone calls to Dr. Lynne Bui, listed as co-founder and CEO of Khloris Biosciences, but received no response.

If a tenant signs a lease but never occupies the building or pays rent, it can eliminate a crucial cash flow stream that the property owner would normally rely on for mortgage payments. It is unclear if this was the case with Khloris Biosciences and the Fontanoso Way building.