Goldman and TMG surrender Silicon Valley office campus to KKR

A joint venture between Goldman Sachs and TMG Partners has surrendered a five-building Silicon Valley office complex to lender KKR Real Estate Finance Trust, The Real Deal has learned. 

The 446,000-square-foot campus, located at 350-380 Ellis Street in Mountain View, previously housed the headquarters of cybersecurity firm NortonLifeLock. Goldman and TMG relinquished ownership with $293 million of unpaid debt still remaining on the asset, according to a deed-in-lieu of foreclosure filed July 2. 

KKR provided a $200 million loan on the property in 2021. In July last year, KKR said that it was considering “next steps” as the mortgage entered the highest category of risk. At that point, the loan’s floating rate had escalated from 3.5 percent at the time of its origination to 8.5 percent.

Goldman and TMG bought the office complex for $357.6 million in July 2021, property records show. NortonLifeLock, the seller in that deal, signed a seven-year lease for one of the buildings in the campus, according to a previous report from the Silicon Valley Business Journal. In 2018, NortonLifeLock spent $22 million on lobby renovations for the property. 

KKR mentioned the transaction in a second-quarter supplemental report filed with the Securities and Exchange Commission yesterday. During the second quarter, the firm also took possession of a life science property in Seattle and wrote off a mezzanine office loan in Boston. Those transactions, along with the Ellis Street transfer, resulted in losses of $136 million for KKR. 

The Ellis Street foreclosure is the latest example of landlords handing back the keys on properties that are underwater. In March, TPG Angelo Gordon relinquished ownership of 515 and 545 North Wisman Road, a 153,400-square-foot office complex in Mountain View. Meanwhile, GEM Realty and Flynn Properties are facing foreclosure in relation to a two-building office complex in Union Square in San Francisco.   

Goldman surrendered the Ellis Street asset in spite of strong earnings in the second quarter. During the period, the firm’s net income rose to $3 billion, or around $8.62 per share. The figure was about 3 percent higher than analyst estimates of $8.34 per share.