Big Concord office building topples into loan default as market flops
CONCORD — A loan default on a large office building in downtown Concord offers another ominous hint that the Bay Area commercial property market is increasingly feeble.
Sutter Square, a nine-story office building at 1800 Sutter Street in downtown Concord, faces an uncertain future after its owner defaulted on a $25.2 million loan, according to documents filed on Aug. 15 with the Contra Costa County Recorder’s Office.
The building totals 176,600 square feet and is prominently located at the corner of Clayton Road and Sutter Street, a few blocks from the Concord BART station.
In 2020, Pacific Western Bank, a predecessor of Banc of California, provided the office building’s now-delinquent financing, county real estate records show.
Barker Pacific Group, acting through an affiliate, is the owner of the office building that faces foreclosure and seizure by Banc of California due to the loan delinquency.
Banc of California in April 2024 filed a lawsuit against the affiliate of the property owner. One of the lawsuit’s primary goals was to install a court-ordered receiver to manage and operate the property and collect rents from tenants in the office building. A Contra Costa County Superior Court judge has appointed a receiver.
During the spring of this year, the bank demanded payment of the entire loan, plus penalties and certain fees. The loan matured in January 2024.
“Despite Banc of California’s payment demand, no sums have been paid,” the bank stated in the April 2024 lawsuit.
A growing number of office building owners have decided to walk away from their properties for an array of circumstances.
Sky-high interest rates and stubbornly elevated inflation, along with labor and materials costs, have coalesced to produce a forbidding economic environment for owners of office buildings and certain retail centers.
A replacement of the expiring loan would likely have been characterized by high-interest loans, which would then equate to a burdensome monthly mortgage payment.
The receiver intended to hire Colliers, a commercial real estate firm, to handle the leasing of the office building.
A key challenge emerged in recent months for Sutter Square due to the departure of a big tenant.
“Prior to the receiver’s appointment, Cubic Transportation System, the largest tenant, gave notice of its intention to not renew their lease,” the receiver stated in a report to the court.
Cubic Transportation is vacating 22,963 square feet, court records show. The tenant was paying $68,817 in monthly rent. That would equate to about $3 a square foot each month.
“The receiver is working to find alternative tenants for this space,” the receiver stated in the court papers.