$120M Loan Backed By Mountain View Mixed-Use Portfolio Defaults

A $120M loan backing a portfolio of office, light industrial, and research and development buildings in Silicon Valley entered maturity default in June.

According to Morningstar, the Zappettini portfolio loan is backed by 10 Mountain View properties, some of which are in the Terra Bella Tech Park.

The Santa Clara County Social Services Agency Leases Space At One Of The Properties Tied To The Loan Default.

Cushman & Wakefield, the Terra Bella Tech Park leasing broker, declined to comment on the space.

The Zappettini Family Office, the San Francisco-based family office that owns the portfolio, didn't respond to a request for comment.

The portfolio consists of the following properties:

  • 1212 Terra Bella Ave.

  • 850-900 N. Shoreline Blvd.

  • 1277 Terra Bella Ave.

  • 1340 W. Middlefield Road

  • 1255 Terra Bella Ave.

  • 1305 Terra Bella Ave.

  • 1330 W. Middlefield Road

  • 1245 Terra Bella Ave.

  • 1350 W. Middlefield Road

  • 1215 Terra Bella Ave.

“My assumption is that this loan was still performing but had a lot of tenant rollover risk that made getting takeout financing difficult in the current environment,” Morningstar Credit Analytics Head of CRE Analytics David Putro told Bisnow in an email.

The most recent servicer data shows the portfolio was 87% occupied as of September 2023.

“The issue could be that 41% of that tenancy had lease expirations pending, so it’s possible that the occupancy has dropped since then,” Putro said. “The County of Santa Clara was the largest of these, but from their website, they’re still in the 1330 West Middlefield property.”

The Santa Clara County Social Services Agency still occupies 1330 W. Middlefield. According to PropertyShark, the asset is a single-tenant building measuring approximately 25K SF.

Santa Clara County didn't respond to a request for comment.

The U.S. CMBS delinquency rate ticked up to 2.45% in June from 2.42% in May “due to continued higher office delinquency volume offset by strong resolution activity and new issuance,” Fitch Ratings reported.

“Silicon Valley's office market continued to contract throughout the second quarter, with negative net absorption reflecting tenants and owners having more serious conversations about cost containment, future footprints, and returns to office,” CBRE said in a Q2 research report.

The Mountain View-Los Altos office submarket had a Q2 vacancy rate of 23.6%, according to CBRE.

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