Big South Bay office building is bought, deal shows huge price plunge

SUNNYVALE — An eye-catching South Bay office building that was once the headquarters of bankrupt biotech company 23andMe has been bought at a price that reflects a massive decline in the property’s value.

The office building, located at 221 North Mathilda Avenue in Sunnyvale, was bought for $87.8 million, according to documents filed on June 5 with the Santa Clara County Recorder’s Office.

The new owner was able to buy the building at a price that was far below what the sellers paid for the high-profile property, a review of county documents shows.

Spear Street Capital, acting through an affiliate, is the new owner of the building, according to the real estate records.

Stockbridge Capital Group had bought the building for $183 million in 2019, the last full year before the coronavirus outbreak.

The coronavirus unleashed countless economic ailments worldwide, due in part at least to wide-ranging government-mandated business shutdowns that chased people away from their workplaces.

The economic maladies that the coronavirus spawned weren’t all immediately visible at the outset of the outbreak in 2020.

Over the last two years, however, it’s become apparent that the coronavirus-linked consequences include a catastrophic meltdown in the values of office buildings and other commercial properties in the Bay Area.

That appears to be the case with the 221 North Mathilda office building, which once was leased to 23andMe, a genomics and biotech company that in 2021 had a market value of $6 billion but now is bankrupt.

The three-story building totals about 156,000 square feet. Stockbridge Capital bought the building immediately after 23andMe leased the property.

At the time Stockbridge bought the building, the Silicon Valley office market was sizzling, tech and biotech companies were grabbing and leasing sites at a fevered pace, and demand for office space was sky-high.

The coronavirus outbreak changed all that.

The name of the office complex, Grove 221, is a reference to the fruit groves and orchards that once dotted that part of Silicon Valley, as well as a long-gone Libby’s fruit cannery that had operated nearby for decades.

The building’s value peaked in early 2022 at $188.6 million, according to an estimate produced by the Santa Clara County Assessor’s Office.

But by 2023, the building had an assessed value of $160 million. In January 2024, that estimated value had plunged to $140 million, an example of the collapse in office building values throughout the Bay Area.

Even the $140 million value posted in early 2024 by county assessor officials appears to have been much too high.

Spear Street Capital’s purchase of the building reflects a nosedive of 52% in the value of the building compared to its prior sales price.

Ominously, the latest price is also 37.5% below its January 2024 assessed value.

The effects of slumping property values extend beyond the owners of real estate. Property value trends can imperil revenue for an array of public agencies.

If real estate values turn soft in a region, the decline could impede a crucial revenue stream for cities, counties, regional agencies and school districts.

In a twist, the new owner of the building is the company that developed it and then sold it to Stockbridge.

In 2014, Spear Street Capital bought the property for $16.1 million, and in 2015, the developer obtained a $10 million loan for the site, county records show.