MOUNTAIN VIEW — A big tech park in Mountain View has toppled into a loan default, a $100 million-plus delinquency that is a disquieting reminder of the weakness of the Bay Area office market.
Terra Bella Tech Park, a 10-building campus in Mountain View near the interchange of U.S. Highway 101 and North Shoreline Boulevard and numerous Google office hubs, is in default on its real estate loan, according to documents filed on March 10 with the Santa Clara County Recorder’s Office.
The owner of the 10 office and research buildings in the tech campus is in default on $120 million in financing the county records show.
Citi Real Estate Funding provided the financing and is now threatening to foreclose on the loan in order to seize ownership of the properties.
At the time of the delinquency, the unpaid debt was $126.3 million, including late payments, fees and penalties.
Zappettini Capital Management, a real estate and investment firm with roots in the floral business, owns the properties that are in default through a series of affiliates, county and state business records show.
San Francisco-based Zappettini Capital’s affiliates, whose principal executive is John Zappettini, obtained the $120 million in financing in 2019, according to property records.
The Zappettini firm’s struggles with the Mountain View tech park indicate that financial gremlins continue to haunt the Bay Area office market.
Sky-high vacancies, slumping rents, plunging property valules and a growing number of loan defaults remain a challenge for many of the region’s office buildings.
The problems are severe enough that the delinquencies have resulted in loan foreclosures.
The current loan default and potential foreclosure are a stark contrast to a rosy assessment that Citi Real Estate Funding, German American Capital, and JPMorgan Chase Bank filed in 2019 regarding the tech campus, which is known as the Zappettini portfolio.
It’s also a reminder of how quickly a high-flying real estate portfolio can implode into financial woes and delinquency.
“The city of Mountain View is currently developing a growth plan, known as the Terra Bella Vision Plan, which is aimed at a complete redevelopment of a 110-acre area that includes the area where the Zappettini Portfolio Properties are located,” the financial titans stated in a filing with the Securities and Exchange Commission.
The financial firms deemed the proposal, crafted at a time when the Bay Area tech industry was riding a wave of enthusiasm, to be great news for the Zappettini buildings in Mountain View.
“The overall planned changes are expected to take place in the next three to five years,” the financial companies told the SEC in their filing. “It is expected that this will have a positive value impact on the Zappettini Portfolio Properties.”
This plan was floated before the onset of the coronavirus, an outbreak that triggered government-ordered business shutdowns and unleashed an economic catastrophe for the Bay Area office market in the wake of tech industry layoffs and reductions in office space requirements.
Instead of rising property values for office buildings, the opposite has occurred.
In the case of the Zappettini portfolio, Citi Real Estate Funding is seeking payment in full of the loan and the additional fees and costs.
The foreclosure threat doesn’t prevent the Zappettini family from seeking to sell the property, according to the loan default filing. The ownership group has about three months to find a buyer.
The building addresses are 1212, 1215, 1245, 1255, 1277 and 1305 Terra Bella Ave.; 1330 through 1350 West Middlefield Road; and 850-890 North Shoreline Blvd., loan documents on file with the county show.
“Notwithstanding the fact that your property is in foreclosure, you may offer your property for sale, provided the sale is concluded prior to the conclusion of the foreclosure,” Citi Real Estate Funding stated in the loan default filing.