SAN JOSE — A lender has scrapped a delinquency notice for a loan tied to a housing highrise project in downtown San Jose — although the financier warned the move doesn’t preclude a future default proceeding.
The loan involves a vacant lot at the corner of Notre Dame Avenue and Carlysle Street in downtown San Jose, according to documents on file with the Santa Clara County Recorder’s Office.
The Carlysle mixed-use office, housing, and retail tower, located in downtown San Jose at 51 Notre Dame Avenue near Carlysle Street, concept. (Steinberg Hart)
A mixed-use tower of housing, offices and retail spaces is proposed for that site, whose addresses include 51 Notre Dame Avenue.
Construction has yet to begin at the property, which is in a prime location in downtown San Jose.
On Aug. 21, Santa Cruz County Bank, the lender, filed a notice of default against the property, the start of a proceeding that could have led to an auction of the site and a foreclosure of the loan.
The lender has now rescinded that default notice. On Oct. 2, Santa Cruz County Bank filed a notice of recession that canceled the prior default filing.
The bank, however, also warned that the recession won’t preclude the lender from pursuing a different default effort in the future, according to the county property documents.
“This recession shall not in any manner be construed as waiving or affecting any breach or default, past, present, or future,” the bank stated in the public filing with the county.
The lender stated that its goal with the rescinding of the default notice was to head off any immediate effort to sell the property through a foreclosure.
The loan for the property totals $10 million, the county documents show. The bank provided the property owner with the financing in 2021.
Acquity Realty, acting through an affiliate, owns the property, which the Bay Area real estate firm bought in 2021, paying $20 million for the site.
The real estate firm has proposed a 21-story tower at the location. A mix of offices, housing units and ground-floor retail or restaurant spaces are eyed for the site, San Jose city planning documents show.
The project, which Acquity Realty calls The Carlysle, would be a Bay Area rarity in that it would contain a blend of the three major real estate elements in the same tower.
The Bay Area office market has become so weak that developers have largely lost their respective appetites for any major new projects unless they have been able to land a tenant before construction begins.
Record-high vacancy levels, feeble rental rates, a contracting tech sector and a growing number of foreclosures have created an ominous landscape for Bay Area offices.
By far, the worst of the office market’s problems are concentrated in San Francisco, where well over one-third of the office space is empty.
Downtown San Jose and downtown Oakland, however, are also bedeviled by economic gremlins in the form of vacant office spaces.
The Carlysle tower in downtown San Jose was slated to contain 290 apartments and 158,000 square feet of office space.
The San Jose highrise would include 12 floors of residential, five floors of offices, and four floors of parking as well as the ground-floor office and retail or restaurant spaces.
Several nationwide economic obstacles have emerged, however, that have complicated efforts to launch the construction of The Carlysle.
Sky-high interest rates, brutal inflation and fast-rising costs for construction materials and labor have coalesced to complicate the ability of developers to launch their projects, especially large ones such as a tower.