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Can distress lender help San Jose office building avert auction? 

Ownership looks to Legalist for $25M replacement mortgage in bankruptcy court filings

Can Lender Help San Jose Office Building Avert Auction?
10 West Tasman Drive (Google Maps, Getty)

The ownership group of an ailing North San Jose office building wants an alternative to a bankruptcy auction with a loan from an asset management firm that counts debtor-in-possession deals as a speciality.

San Jose-based Heritage 10 West Tasman LLC has tried to work its way out of distress since the property — at 10 West Tasman Drive — went into default on a $29 million loan in late 2023, the San Jose Mercury News reports. 

The ownership and management group — which includes Ji Wan Jung, Sung Hong, Samyang Development, Doo Pyo Lee, Daehyun Kang, Ji Young Kim and David Jankowitz — filed for bankruptcy in April to halt Copia Lending’s plans to sell the building at auction. 

The latest filing by the owners in U.S. Bankruptcy Court pins their hopes on San Francisco-based alternative asset manager Legalist. 

The eight-year-old firm bills itself as manager of more than $1 billion worth of “technology-enabled alternative investments for endowments, foundations, hospitals, insurance companies and family offices.” It lists debtor-in-possession financing along the litigating financing and trading in receivables — also called factoring — owed to government contractors as is chief lines of business.

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The property owners disclosed to the court that they hope to borrow $24.8 million from Legalist to replace Copia as the mortgage lender and satisfy other creditors. The group apparently put $1 million down when it bought the building, taking the original $29 million loan and paying down a portion since then.

The dip in fortunes for office markets throughout the Bay Area, where 30 percent vacancy rates are common, means the owners are still under water by their own estimates. An exhibit filed with the bankruptcy court claims a fair-market value of $21.5 million for the property.

The owners told the court that weak demand has led to difficulty filling the building.

“The pandemic and prolonged more rigorous lockdowns in California as well as the time it took for the businesses to wind down on remote working and revert to a traditional working environment” have taken a toll, the filing states.

A decision by the bankruptcy court is pending; terms of any loan from Legalist were not publicly disclosed.

10 West Tasman was built in 1997 as part of Cisco’s global headquarters.

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