Shorenstein Cuts Executives, Grapples With Office Distress

A beleaguered Shorenstein has taken an axe to its C-suite by laying off its longterm executives.

The San Francisco-based developer, facing up to 7 million square feet of distressed office buildings, has cut seven executives across its San Francisco and New York offices, the San Francisco Business Times reported.

The third generation family firm showed the door to Vice President of Leasing Jim Collins; National Leasing Director Tom McDonnell; Senior Vice President of Asset Management Paul Grafft; and Senior Vice President of Asset Management James Pierre.

All had served Shorenstein for years, in some cases 25 years or more, according to their LinkedIn profiles.

Additional cuts occurred in Shorenstein’s accounting office, two unidentified sources told the newspaper. Before the layoffs, the firm employed more than 200 people. This month, it let go of between 15 and 20 employees.

“Commensurate with headwinds broadly sweeping the office sector, Shorenstein recently enacted its first restructuring since the global pandemic to rightsize its asset management capabilities for today’s market,” an unidentified Shorenstein spokesperson said in a statement to the Business Times.

Neither the firm’s investment committee nor its executive committee were impacted by the cuts, the firm said.

Shorenstein rose to national prominence in San Francisco’s commercial real estate sector in the 20th century under founder Walter Shorenstein and later his son, Doug Shorenstein, according to the Business Times.

The layoffs come as the company led by Brandon Shorenstein struggles with a portfolio of office investments. The firm owns and manages 13.6 million square feet of real estate across the U.S., according to its website, not including legacy properties such as 45 Fremont Street and 50 California Street in San Francisco.

Between 6 million and 7 million square feet of offices owned by Shorenstein are in various stages of financial distress, according to an unidentified source with insight into the matter.

They include buildings for which Shorenstein has stopped making its monthly loan payments; buildings subject to a cash sweep, in which building revenue is automatically rerouted to cover the monthly payment, or other form of lender control; and buildings that, facing pressure from lenders, are considered unlikely to remain in Shorenstein’s portfolio in the long term, according to the newspaper.

“Given pervasive distress across the office market, reporting by the San Francisco Business Times targeting buildings that are purportedly ‘not expected to remain in Shorenstein’s portfolio in the long term’ is speculative, misleading and not based in fact,” the Shorenstein spokesperson said in the statement to the Business Times.

Another 2.7 million square feet of Shorenstein-owned office properties has been sold or lost to foreclosure over the past year, according to a Business Times analysis. In June, the landlord’s defaulted or at-risk debt had reached $822 million.

While Shorenstein has struggled to pay its bills, the firm continues to invest in commercial real estate.

In July, it bought the 324,000-square-foot 14th & Spring in Midtown Atlanta in an all-cash deal, though pricing was not disclosed. In September, it acquired International Plaza II, a 388,000-square-foot building in the Dallas suburbs, for $120.5 million.

— Dana Bartholomew