LoanCore Capital Credit REIT and Sares Regis Group of Northern California plan to replace a four-building office campus in Sunnyvale with 315 townhomes and apartments.
The Connecticut-based real estate investment trust and the San Mateo-based investor have filed preliminary plans to demolish the four-building office park at 1230-1290 Oakmead Parkway, the Silicon Valley Business Journal reported.
The 181,200-square-foot Horizon Sunnyvale office campus would be replaced by 100 townhomes in 16 buildings containing 245,000 square feet. A five-story, 215-unit apartment complex would contain 266,800 square feet.
The developers have filed an application to build the complex under the state builder’s remedy, a legal provision in state housing law that allows builders to skirt local zoning rules in cities
such as Sunnyvale that have failed to certify their required housing plans. Some 20 percent of the homes in the project must be affordable to qualify for builder’s remedy.
The nearly 8-acre office campus is owned by Redwood City-based Embarcadero Capital Partners, which in 2019 borrowed $63.5 million from LoanCore Capital for a full-scale renovation.
But after failing to land tenants for the buildings during a pandemic shift to remote work, Embarcadero stopped making payments on the loan, according to the newspaper.
A preliminary application by the lender and Sares Regis suggest they want to build homes instead of putting the offices back on the foreclosure market.
Bob Staedler of Silicon Valley Synergy, a land-use consultancy not connected with the Horizon Sunnyvale redevelopment, said that LoanCore’s submission is “well thought out.”
He said it’s just the latest “reckoning” in the nation’s office loan crisis, where a higher than usual amount of loans are at risk of default.
“They’re trying to create value out of thin air,” Staedler told the Business Journal of LoanCore’s decision to demolish the offices. “If approved and built, this would be wildly successful.”
In a different but similar case earlier this year, Palo Alto-based Windy Hill Property Ventures submitted office-to-housing plans before its purchase of the Vespaio property was finalized in July.
The original owner had also struggled to generate enough revenue from the commercial portion of its property and ended up offloading it for only $83.5 million, despite taking over $143 million in loans for the project.
Sares Regis and Cupertino-based Hunter Properties are now building Cityline Sunnyvale, including two office buildings and nearly 500 homes, at 250 South Taaffe Street in Downtown Sunnyvale.
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