Gaw Capital Reclaims San Francisco Office Complex $82M

Gaw Capital USA has reclaimed a 293,900-square-foot office complex in San Francisco’s Embarcadero for $82 million, a third of its value before the pandemic.

The U.S. arm of Gaw Capital Partners, based in Hong Kong, repurchased the three-building North Park at 75 Broadway, 560 Davis and 650 Davis streets, near the eastern waterfront, the San Francisco Business Times reported, citing unidentified sources.

The seller was New York-based Blackstone, which gave Gaw the keys after it bought Blackstone’s $150 million loan on the property from Amsterdam-based lender ING Group for $82 million.

The deal works out to $279 per square foot.

Gaw picked up the three-block property through a deed in lieu of foreclosure, in which an owner surrenders the property to its lender, or a company like Gaw that has replaced its lender, instead of having to wade through foreclosure.

Such deeds that bypass foreclosure may soon sweep through Downtown San Francisco as landlords of vacant office buildings struggle to pay their debts. The property turnovers save the time and cost of a foreclosure.

Gaw Capital will benefit from avoiding a transfer tax, a city-imposed tax on property sales applicable only to real property sales, not mortgages or transfers in lieu of foreclosure.

North Park was previously owned by Gaw Capital Partners from 2014 to 2018, then known as Embarcadero Square.

The private equity firm run by Goodwin Gaw then sold the office campus to Blackstone for $245 million, or $833 per square foot. As of October, the four-story brick campus is 40 percent vacant.

Blackstone took a 67 percent loss on the deal.

A spokesperson for Blackstone confirmed the sale, noting the firm wrote off the property last year. Blackstone, with less than 2 percent of its real estate portfolio in traditional offices, joins other San Francisco landlords in selling off office properties at major discounts.

In October, Blackstone sold an 82,000-square-foot office building at 650 7th Street in Showplace Square to Irvine-based LBA Realty in a buy-back deal for $305 per square foot.

The Blackstone sales contribute to the growing number of San Francisco office properties since August that have traded at discounts from their pre-pandemic values.

The office vacancy rate in San Francisco hit a record 33.9 percent in the third quarter during a continued shift to remote work, with office values plummeting across the market.

Gaw Capital, run by one of the richest families in Hong Kong, owns a 17-story office building at 555 Montgomery Street in the Financial District. An affiliate, Downtown Properties, owns two other office properties at 300 and 550 Montgomery Street.

— Dana Bartholomew