Lone Star Funds is now officially the owner of a 20-story office tower once helmed by WeWork in San Francisco after a public foreclosure auction held last week drew no takers.
The roughly 360,000-square-foot office building at 600 California Street was once valued at more than $320 million, the San Francisco Chronicle reported. The Dallas-based private equity firm, which had bought the debt on the distressed property in the North Financial District from lender Goldman Sachs in January for $130 million, paid $361 per square foot.
The takeover came three years after WeWork Capital Advisors and New York-based Rhône Group defaulted on a $240 million loan when their former anchor tenant, WeWork, stopped paying rent.
WeWork Capital Advisors, an offshoot of the co-working pioneer, bought the building in the fall of 2019 for $322.8 million, or $897 per square foot. It was appraised in 2024 at $109 million, or $303 per square foot, a 66 percent drop.
The marble and glass Class A office building, built in 1991, reflects how office values have plunged since the pandemic across San Francisco, where a flight to remote work emptied out a third of the city’s offices.
In the first three months of the year, the city’s office vacancy was 31.1 percent, compared to 5.4 percent in 2019, according to a new report from Cushman & Wakefield.
Some market participants said the Whoopee Cushion sale of 600 California points to continued weakness in the office market, challenging claims of full recovery, according to the Chronicle.
Lone Star declined to comment on its acquisition of the largely vacant tower.
Lone Star’s interest tracks with its latest $2.7 billion opportunistic fund, raised in late 2024 to target commercial properties under lender pressure.
With about $95 billion under management as of late last year, the firm has been blunt about its strategy.
Lone Star recently bought a major downtown Denver tower for $132.5 million, and teamed up with Miami partners on Fort Lauderdale’s Bank of America Plaza for $221 million.
“Most transactions we see and expect are from the banks facing pressure to de-lever their books,” Jerome Foulon, Lone Star’s global head of commercial real estate, told Private Equity Real Estate when the fund closed. “A lot of investors have recognized this is a Lone Star kind of market.”
– Dana Bartholomew
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