Owners of Major SF Office Properties Bullish on Refinancing

Some of San Francisco’s top buildings face looming mortgage payment deadlines in the wake of Westfield’s mall departure. No worries, major landlords say.

Despite record-high office vacancy rates and lower foot traffic, owners of some of the biggest properties are confident about paying off loans, the San Francisco Chronicle reported.

The city’s fourth-tallest building, an office tower at 555 California Street, is valued at more than $1 billion. It’s tied to a $1.2 billion loan due in May.

The former Bank of America headquarters is owned by New York-based Vornado Realty Trust and The Trump Organization, which just extended the loan’s maturity date for one year. Goldman Sachs, KKR, Microsoft and Bank of America all have renewed leases without downsizing.

On an earnings call last month, executives said “there’s never been a threat of default. There’s never been an issue with this loan.”

One Market Plaza, another $1 billion office tower at 1 Market Street, is home to Google, Autodesk and Visa. The property, owned by Blackstone and Paramount Group, both based in New York, has a $975 million mortgage due in February.

Thomas Bravo, GIC and Novo Holdings have signed new leases, while Visa and Autodesk have listed offices for sublease, but must pay rent until they find subtenants.

“One Market Plaza is a high-quality, trophy office asset that is (around) 96 percent leased and has seen more leasing activity since the onset of COVID than any other major office campus in San Francisco,” a Blackstone spokesperson told the Chronicle.

Stonestown Galleria, a 775,000-square-foot mall at 3251 20th Avenue, is home to more than 125 shops and restaurants. The property owned by New York-based Brookfield Properties has a $180 million loan due in October.

But unlike the struggling Westfield San Francisco Centre, foot traffic has exceeded 2019 levels and new retailers and restaurants continue to open.

“We are comfortable that we will be able to address the loan maturity,” Lindsay Kahn, a Brookfield spokeswoman, told the Chronicle. “Additionally, Stonestown Galleria remains a healthy, thriving destination for the community and has rebounded since the pandemic.”

Although San Francisco’s top office and retail properties still attract demand during what brokers call a “flight to quality,” the market faces challenges as loans come due.

“Across the board, San Francisco has been taking a beating,” David Putro, head of commercial real estate analytics at Morningstar Credit, told the newspaper. “It has become incredibly difficult to refinance for all offices.”

With weakened demand and rising interest rates, it’s harder for owners to refinance loans, forcing some to either pay in full or risk foreclosure.

Yet property owners are confident they can refinance tens of millions of dollars in loans set to mature this fall and in 2024, according to the Chronicle.

They include the owners of the former headquarters of Charles Schwab at 211 Main Street; the Hilton San Francisco Financial District at 750 Kearny Street; a building that faces Union Square at 212 Stockton Street; and a SoMa office building at 149 New Montgomery Street.