143 and 151 East Main Street, an office building and cafe site in downtown Los Gatos.
LOS GATOS — Two downtown Los Gatos commercial properties in prime locations have been seized by a lender through foreclosure of a delinquent loan for the sites.
The Los Gatos properties that were foreclosed are an office building at 2 North Santa Cruz Avenue and an office and restaurant building with addresses of 143 and 151 East Main Street, according to documents on file with the Santa Clara County Recorder’s Office.
The East Main Street building’s tenants include the Cafe Dio restaurant and espresso bar and the Design by Mish furniture store. The North Santa Cruz building’s tenants include a real estate office and a travel agency.
The foreclosure, which occurred on Jan. 25, is a reminder that financial setbacks can haunt real estate investors even in upscale property markets such as downtown Los Gatos.
In the wake of the foreclosure auction, the lender that now owns the property took title via the name CSPN, a Delaware-based entity that is affiliated with CSP Notes, a trustee’s deed filed with the county on Feb. 6 shows.
The lender provided a $20.5 million loan in 2021 to Kenneth Ryan Koch, a real estate executive who has addresses in El Dorado Hills and Grass Valley. A Koch affiliate called Esckoch bought the two properties a few years ago.
The opening bid in the foreclosure auction, which lasted a few minutes with several rounds of bids, was $1 million, which was set by the lender, whose representative was trustee Beacon Default Management.
A real estate investor placed multiple bids, with the lender continuously topping the outside investor’s bids at the end of each round.
Ultimately, the investor dropped out when the lender’s bid reached $7 million.
Since lenders typically are averse to owning foreclosed properties on a long-term basis, it’s possible that CSPN will attempt to find a buyer for one or both properties.
“The $20.5 million seems to be a lot of debt for these fairly small properties,” said David Taxin, a partner with Meacham/Oppenheimer, a commercial real estate firm that specializes in the retail sector.
Downtown Los Gatos is one of the top real estate markets in the Bay Area. That means commercial property foreclosures due to delinquent loans are a relatively rare circumstance.
“This was an odd deal and circumstance with these buildings and way too much debt,” Taxin said.
