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Downtown Los Gatos prime sites are seized by lender in foreclosure

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LOS GATOS — Two commercial properties in prime downtown Los Gatos have been seized by lenders through foreclosure on delinquent loans.

The Los Gatos properties that have been foreclosed include an office building at 2 North Santa Cruz Avenue and an office and restaurant building at 143 and 151 East Main Street.

Foreclosures are a reminder that financial setbacks can plague real estate investors, even in upscale commercial real estate markets such as downtown Los Gatos.

After the foreclosure auction, the current owner of the property is W Financial, according to county real estate records.

2 North Santa Cruz Avenue, an office building in downtown Los Gatos. (Google Map)

W Financial has provided a $20.5 million loan in 2021 to real estate manager Kenneth Ryan Koch with addresses in Eldorado Hills and Grass Valley. A Koch affiliate called Esckoch purchased two of his properties a few years ago.

The first bid in the foreclosure auction lasted several minutes, with several rounds of bidding, and was $1 million. This was set up by the lender, whose representative was her Beacon Default Management, the trustee.

Property investors submitted multiple bids, and lenders consistently beat outside investors’ bids at the end of each round.

Ultimately, investors dropped out when the lender’s bid reached $7 million.

Lenders are generally reluctant to own long-term properties that have been foreclosed on, so it is possible that W Financial will try to find a buyer for one or both properties.

Tenants in the East Main Street building include Cafe Dio restaurant and espresso bar, Design by Mish furniture store.

Tenants in the North Santa Cruz building include a real estate office and a travel agency.

“$20.5 million seems like a lot of debt for these fairly small properties,” said David Tuxin, partner at Meacham/Oppenheimer, a commercial real estate firm that specializes in the retail sector.

Downtown Los Gatos is one of the Bay Area’s premier real estate markets. As a result, commercial property foreclosures due to delinquent loans are relatively rare situations.

“This was a strange deal and situation with these buildings and too much debt,” Tuxin said.

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