Foreclosure looms for empty San Jose office and biotech building

A big San Jose office and research building faces foreclosure and seizure by its lender due to a mortgage default.

SAN JOSE — A big San Jose office and research building faces foreclosure and seizure by its lender, a fresh reminder of the widening post-coronavirus ailments that afflict the Bay Area commercial real estate market.

At one point, Khloris Biosciences had signed a lease to occupy the entire building. It wasn’t clear, however, whether the company ever occupied the building at 5729 Fontanoso Way in south San Jose.

Now, the property’s lender, The Evergreen Advantage, has scheduled a public auction for the office building as part of its efforts to foreclose the delinquent loan, according to documents filed on Oct. 23 with the Santa Clara County Recorder’s Office.

The delinquent loan, issued in July 2022, totals $18.4 million, county documents show.

Due to back-interest, late-payment penalties and unspecified fees, the amount owed by the borrower and property owner has climbed to $24.5 million, according to the real estate records.

In May 2022, Saratoga-based Atlas Capital Investments paid $27.4 million to buy the building, which totals 78,200 square feet and occupies a 4.7-acre site.

At the time of the transaction, Atlas Capital obtained the $18.4 million loan from Evergreen Advantage to finance the purchase.

The foreclosure and auction are scheduled for Nov. 15, according to property documents.

Around that same time, Khloris Biosciences, whose motto “a world without cancer” is splashed prominently on its website, signed a lease for the entire building. Joseph Wu, director of the Stanford Cardiovascular Institute and Lynne Bui, a South Bay oncologist, co-founded Khloris Biosciences.

In 2018, Khloris Biosciences also raised $5 million in a venture funding round, according to the Crunchbase website. Neither Khloris nor Crunchbase referenced any subsequent funding rounds for the biotech firm.

The Bay Area office market has stumbled badly in the wake of the coronavirus outbreak due to an uneven pace for a return to the workplace. Tech companies have dramatically scaled back their appetite for office space.