A historic office building in San Francisco’s Financial District took a dramatic valuation hit recently.
Swift Real Estate Partners’ building at 260 California Street was most recently valued at $13 million, per an August note to commercial mortgage-backed securities bond holders, the San Francisco Business Times reported. The appraisal amounts to $464 per square foot and a drop of 60 percent.
The 28,000-square-foot building was valued at $32.2 million in 2015.
The loan backed by the property was transferred to special servicing this spring, after Google left the building, out of fear of imminent default due to decreasing occupancy and cash flow at the building.
The debt originated at almost $19.8 million and matured in April; the outstanding balance was just shy of $17 million earlier this month.
Three of the building’s largest tenants had leases at the building that were scheduled to expire by September.
Google occupied about 20 percent of the building with a 9,200-square-foot lease that expired in April. The Alphabet-owned company has been slimming down its Bay Area office portfolio in recent years, declining to renew several downtown leases last year, including a 342,000 square feet at One Market Plaza.
Citibank is next to head out the door. The banking giant will close its branch at 260 California in February, in addition to a location at 245 Market Street, in favor of its new location at 1 California Street.
With the large leases expiring, the building’s vacancy hovers around 50 percent, David Putro, head of commercial real estate analytics for Morningstar Credit, told the outlet. At the time of its initial appraisal in 2015, the property was 96 percent occupied. Up until the most recent vacancies, the loan tied to the building had performed well.
Swift Real Estate Partners is working with the special servicer under a pre-negotiation agreement and has submitted a proposal for loan modification.
The building was erected in 1910 and renovated in 2009. The property has a penthouse space known as Newhall Nest, which is used as a tenant amenity and private event space.
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