Redco Development is poised to buy a $25 million loan to allow it to take control of a 78,700-square-foot office building owned by Shorenstein in San Francisco’s Showplace Square.
The locally based investor bought the loan linked to the four-story office and industrial building at 208 Utah Street, the San Francisco Business Times reported, citing unidentified sources. The seller was Capital One, the lender behind the mortgage loan.
The pending deal is expected to value the building at around $190 per square foot, or $15 million.
The locally based Shorenstein bought the property in 2012 for $25.7 million, or $326 per square foot. In 2019, the firm refinanced it with the $25 million loan from Capital One.
If it closes the deal, Redco could acquire the building through foreclosure or a deed-in-lieu of foreclosure. Marketing materials for the loan early this year billed it as a way to acquire the property, suggesting Capital One expected Shorenstein to cooperate with buyers.
Redco could ultimately acquire a largely empty brick building, built in 1911. Next month, Strava’s lease for a 34,000-square-foot headquarters expires following its move to a new hub at 181 Fremont Street.
The pending purchase may widen a crack in Shorenstein’s office empire, now facing growing pressure from lenders.
Last month, the family-owned firm and New York-based Blackstone were about to list a 34-story, 690,000-square-foot tower struggling with rising vacancy at 45 Fremont Street.
Multiple market insiders told the San Francisco Chronicle its owners faced pressure to sell the building from Bank of America, which in 2019 provided a $347 million loan secured by the property.
Shorenstein confronts growing financial headwinds — laying off executives this year after grappling with up to 7 million square feet of distressed office buildings. Over the past year, it sold or lost to foreclosure some 2.7 million square feet of offices, the Business Times reported.
At the close of last year, the firm led by Brandon Shorenstein had 13.6 million square feet of offices, though that didn’t include several legacy investments in San Francisco.
Redco, on the other hand, has emerged as one of the most active buyers in downtown San Francisco in the wake of the pandemic, which marked a shift to remote work and the collapse of the broader office market.
The firm picked up the popular Irish Bar Harrington’s, a 85,600-square-foot office building at 400 Montgomery Street and a 119,000-square-foot office building at 300 California Street, within three blocks in the Financial District.
— Dana Bartholomew
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