{"id":232613,"date":"2026-03-23T14:33:15","date_gmt":"2026-03-23T14:33:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/232613\/"},"modified":"2026-03-23T14:33:15","modified_gmt":"2026-03-23T14:33:15","slug":"why-san-franciscos-newest-mega-office-had-to-be-sold-to-stand-a-chance","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/232613\/","title":{"rendered":"Why San Francisco\u2019s newest mega office had to be sold to stand a chance"},"content":{"rendered":"

I heard a self-deprecating joke recently at a cocktail party for real estate types that feels especially fitting in today\u2019s market: \u201cYou can do the right thing, and good things will happen to everyone but you.\u201d\u00a0<\/p>\n

That appears to be the case for Brookfield Properties, which in 2022 opened an opulent 25-story office tower in San Francisco but found it to be virtually unleasable despite being the newest product on the market.\u00a0<\/p>\n

Maybe you\u2019re not inclined to feel sympathetic for developers, but the 648,000-square-foot property known as 5M sat more than 90% vacant for nearly four years, meaning the downtown neighborhood it was supposed to help transform was in a state of suspended animation<\/a>.\u00a0<\/p>\n

But under the stewardship of new owners, this behemoth of a building has a shot at getting filled.\u00a0<\/p>\n

Last week, sources confirmed to The Standard that the outstanding debt tied to the construction of the building at 415 Natoma St. had been sold to a pair of out-of-town investors: The Meridian Group from Maryland and Fenway Capital Partners Advisors from Southern California.\u00a0<\/p>\n

The deal would see the pair take control of the property through a deed in lieu of foreclosure, which involves Brookfield \u201cpeacefully\u201d transferring ownership rather than being forced to do so through the foreclosure process. The sale price is not known, but this type of transaction indicates that the debt will trade hands at a discount.\u00a0<\/p>\n

\"\"The 648,000-square-foot property opened in 2022. | Source: Morgan Ellis\/The Standard\"AThe developers built a public park behind the building. | Source: Morgan Ellis\/The Standard<\/p>\n

The San Francisco Chronicle was first to report (opens in new tab)<\/a> the sale of Brookfield\u2019s outstanding debt.\u00a0<\/p>\n

Sources say Meridian started exploring San Francisco office assets last year when it opened its first outpost in the city, at Three Embarcadero Center. In June, the Bethesda-based investment firm hired Alex Cheek from Goldman Sachs to lead the new office.\u00a0<\/p>\n

At the time of Cheek\u2019s appointment, Meridian said (opens in new tab)<\/a> its office investment strategy would center on \u201cacquiring and repositioning trophy assets in key gateway markets.\u201d Although 5M marks Meridian\u2019s first foray into San Francisco, Cheek previously led Goldman\u2019s real estate investment trust, which has been active in the market for years.\u00a0<\/p>\n

Meridian, Fenway, and Brookfield did not respond to requests for comment.\u00a0<\/p>\n

Once they gain control of the 5M office tower, the new owners will be able to lease the available floors for significantly less than Brookfield was asking.<\/p>\n

Sources familiar with past listings said Brookfield was asking for more than $100 per square foot, plus additional costs related to building insurance, maintenance, and operating expenses.\u00a0<\/p>\n

Those prices were being achieved at only a handful of office properties in Mission Bay, Jackson Square, and the Financial District and were far beyond what was justifiable in SoMa or the Mid-Market area, where 5M is located. Average asking rents in those neighborhoods at the end of last year were $66 and $44 per square foot, respectively, according to Cushman & Wakefield.\u00a0<\/p>\n

Brookfield might have reduced its price to meet the market. But landlords in commercial real estate are bound by lenders, who underwrite deals to hit fixed cash-flow levels.<\/p>\n

Moreover, the floors inside 5M are mostly empty shells, with no furniture or decor. So improvements and furnishings that could have helped the building compete on the market would have only increased the pressure to charge higher rent.\u00a0<\/p>\n

Zendesk had committed to leasing 90% of the tower before construction was completed but backed out of the deal shortly after the start of the pandemic. While there is little demand now for that volume of office space, investors like Meridian and Fenway are betting that interest will rise as more companies grow over time.\u00a0<\/p>\n

It took more than a decade for Brookfield to line up the right parcels, partners, and entitlements to make 5M possible.\u00a0<\/p>\n

Now, someone else will come in and reap the rewards. Funny, right?\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"I heard a self-deprecating joke recently at a cocktail party for real estate types that feels especially fitting…\n","protected":false},"author":2,"featured_media":232614,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[3010,21401,12546,101,103,102,104,106,105],"class_list":["post-232613","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-francisco","tag-commercial-real-estate","tag-mid-market","tag-return-to-office","tag-san-francisco","tag-san-francisco-headlines","tag-san-francisco-news","tag-sf","tag-sf-headlines","tag-sf-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/232613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=232613"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/232613\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/232614"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=232613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=232613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=232613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}