LNR Partners lists Mid-Market building that fell into foreclosure earlier this year
By Katie Burke
CoStar News
September 20, 2024 | 12:46 P.M.
Within months of taking ownership of a struggling office tower in San Francisco’s Mid-Market neighborhood, the property’s lender has now listed it for sale in what will be the latest test of the city’s valuation certainty.
LNR Partners, a Florida-based financing firm, has put the 16-story building at 995 Market St. up for sale after earlier this year foreclosing on and taking ownership of the roughly 90,000-square-foot property. CBRE has been enlisted to help market the building, looking to land a price of about $9 million, or $100 per square foot, according to people familiar with the listing.
The lender-turned-owner took over the building at a public auction in April when it bid less than $6.6 million, or about $72 per square foot.
LNR, a subsidiary of Starwood Property Trust, was initially brought on as a special servicer after New York-based investment firm Bridgeton Holdings, the property’s former owner, last year stopped making payments on its $45 million commercial mortgage-backed securities loan. The Starwood affiliate took over the loan from its original lender in April when it had a balance of more than $47 million.
Bridgeton acquired the building for $62 million in early 2016, a point when San Francisco’s office market was the most expensive in the country and unable to keep up with the skyrocketing demand from a cohort of fast-growing tech tenants. The Mid-Market neighborhood in particular ballooned thanks to companies such as Spotify, Twitter, Uber, Block, Reddit and Zendesk, among others.
However, an exodus of tech and other users of large swaths of office space in recent years has compounded the neighborhood’s challenges, making it especially difficult for landlords that bought at the top of the market and have since struggled in the face of plummeting valuations, soaring vacancies and little demand on the horizon.
The Mid-Market area’s office vacancy rate is now higher than 26%, according to CoStar analysis, making it one of San Francisco’s most troubled neighborhoods in terms of stagnant leasing, record-high sublet availability and declining rents. The neighborhood’s office availability rate is now about 35%, according to the data, and ongoing loan-related distress is expected to force some ownership transfers through foreclosures or short sales over the foreseeable future.
LNR’s auction bid valuation represents a nearly 90% decline compared to Bridgeton’s 2016 purchase price. Neither firm immediately responded to CoStar News’ requests for comment.
Proceeds from any future sale of 995 Market St., which is more than 95% vacant, will likely be returned to CMBS bondholders.
(Posted with permission by CoStar)
