SAN JOSE — Two small San Jose office buildings perched on a prominent site have toppled into a loan delinquency — but the property owner has begun to scout for replacement financing.
The default is fresh evidence that economic woes still hound the Bay Area office market.
The office buildings, located on The Alameda near downtown San Jose, could be seized through foreclosure if the loan isn’t repaid or a restructuring of the financing isn’t accomplished.
The ownership group for the buildings, however, is working on landing a U.S. Small Business Administration loan to replace the existing financing that had slipped into default.
“We’re working on getting an SBA loan to replace the current loan,” said Claudia Folzman, a business executive who heads up the real estate entities that own the two buildings.
The two buildings are located at 1955 and 1961 The Alameda and sit next to each other adjacent to an interchange with Interstate 880.
Each building is in default on a $6.7 million loan, according to documents filed on May 2 with the Santa Clara County Recorder’s Office.
Security National Life Insurance provided the financing for the two buildings in April 2023.
In a time of high interest rates, a growing number of owners of commercial real estate properties are choosing to yield control of the buildings to their lenders because it’s becoming tougher for building owners to land replacement financing.
It wasn’t clear from the public records when the financing for the two office buildings might mature.
The ownership groups for the buildings are based in the South Bay.
Folzman and David Edgar are listed as individuals who head up the ownership group for the 1955 The Alameda office building, according to county real estate records. Folzman is also listed as a person who heads up the group that owns the 1961 The Alameda building.
Folzman and Edgar are principal executives with Iron Construction, according to that company’s website. Iron Construction also is a tenant in the 1955 The Alameda office building, which totals 15,500 square feet, according to LoopNet.
1961 The Alameda totals 2,500 square feet. That building’s tenants include the Hispanic Foundation of Silicon Valley.
The Folzman-led groups that own the buildings had reached an agreement with the lender to hold off on the default process and provide an extension on the loan to enable the SBA replacement financing to take effect.
What is certain, in Folzman’s view, is the tough rate environment that can make mortgages costly.
“Interest rates are terrible right now,” Folzman said.
