SAN JOSE — A high-profile nonprofit was able to capitalize on a failed property loan and the floundering Bay Area office market to pave the way for its purchase of a new San Jose headquarters site.
Goodwill of Silicon Valley has disclosed that it paid $17 million for a north San Jose office building at 1600 Technology Drive that the charitable organization will transform into its new headquarters — and potentially office spaces for other nonprofits.
The nonprofit, however, didn’t obtain the top-notch office building through a typical approach of finding a willing buyer and then plunking down money to purchase a property.
Instead, Goodwill took a creative approach, Santa Clara County public records show.
The nonprofit bought the failed loan on the office building from a life insurance company that was the lender for the property. Goodwill then foreclosed on the delinquent loan to gain ownership of the site.
Goodwill and Wisconsin-based Northwestern Mutual Life Insurance Co. struck a deal whereby the nonprofit used a deed-in-lieu of foreclosure to become the new owner of the office building, documents on file with the Santa Clara County Recorder’s Office show.
The nonprofit paid $17 million to buy the loan, the nonprofit said. The loan was originally issued in 2012.
The unpaid debt on the loan for the office building totaled $27.3 million at the time Goodwill of Silicon Valley completed its purchase of the financing instrument and foreclosed on the mortgage, according to the county records.
The building will house Goodwill’s headquarters and an array of innovative job training and employment opportunity services, including the Career Technical Education Program, which provides no-cost skills training to help a variety of local residents.
The new Goodwill office hub, located near San Jose International Airport, is part of an expansion effort and renovation plans on the nonprofit’s part. A $10 million gift from MacKenzie Scott, an author and philanthropist, supported Goodwill’s purchase deal.
At present, Goodwill’s headquarters are in an aging 75-year-old warehouse complex on North Seventh Street that once was a Levi Strauss manufacturing center.
The old warehouse also serves as a hub for collecting, sorting and distributing donated goods for its network of thrift stores.
“Goodwill of Silicon Valley’s mission to help people overcome employment barriers is at the heart of this real estate decision,” said Erik Hallgrimson, Chairman of the Board of Goodwill Silicon Valley. “Our new headquarters will enable us to fulfill our mission more efficiently, befitting our immediate and future needs.”
The office building that Goodwill has bought had a value of $92.4 million as of January 2024, according to documents on file with the Santa Clara County Recorder’s Office.
That means Goodwill paid a jaw-dropping 81.6% less than the current assessed value of the office building, which totals 198,000 square feet.
Goodwill of Silicon Valley intends to immediately begin relocating its administrative and programmatic operations to the new building on Technology Drive.
Other local nonprofit organizations will be able to operate in any vacant space in the building that Goodwill doesn’t use.
Goodwill intenfs to construct a new, state-of-the-art warehouse facility within three years, replacing its current operations on North Seventh Street, which no longer accommodates the organization’s growth.
The South Bay community’s support played a big role in helping Goodwill to gain the resources for the office property deal, the nonprofit said.
“Thanks to this support, combined with fiscal prudence and close attention to operational details, we are in a strong financial position to make this acquisition, which will benefit the community for years to come,” said Chris Baker, acting chief executive officer of Goodwill of Silicon Valley.