Metropolis Pays Off $150M Loan for Part of 489-Story SF Tower

Metropolis Investment Holdings can burn the mortgage for the office floors at a 48-story tower in San Francisco after paying off a $150 million loan.

The Chicago-based investor zeroed out the debt secured by 345 California Center at 345 California Street, in the Financial District, CoStar News reported. The lender was Massachusetts Mutual Life Insurance.

Metropolis, manager of a 6 million-square-foot office portfolio owned by the family of the late German billionaire Hugo Mann, bought the 600,100-square-foot building in 2000 for $200 million, or $333 per square foot.

“Paying off the loan reaffirms our commitment to the San Francisco office market,” Tom Dempsey, head of asset management for Metropolis, said in a statement.

The Postmodernist skyscraper with double flag spires, built in 1986 on a design by Skidmore Owings & Merrill, is the seventh tallest in San Francisco, according to SFYimby.

It’s now 82 percent leased by such tenants as TPG Global, Kroll and Five Star Bank, according to CoStar. Degenkolb Engineers recently signed a lease for 17,000 square feet.

The top 11 floors are occupied by a separately owned hotel, the 155-room Four Seasons Hotel San Francisco at Embarcadero, officially located at 222 Sansome Street. The troubled hotel, owned by Florida-based Westbrook Partners, was headed toward a foreclosure auction this fall.

Metropolis has sued Westbrook for allegedly failing to pay nearly $400,000 in rent and fees.

The Metropolis payoff for the lower office floors is rare among office landlords in San Francisco and across the U.S., where higher mortgage rates and empty offices brought on by a pandemic shift to remote work have made refinancing difficult.

Defaults and foreclosures on loans tied to commercial mortgage-backed securities have become the norm across the country, particularly in San Francisco. Billions in CMBS loans are coming due, with $8.6 billion of CMBS loans slated to mature nationwide this month.

San Francisco, the toughest office market in the nation, has an office vacancy of 23.2 percent, compared to the national average of 13.9 percent, according to CoStar. CBRE put the record vacancy closer to 37 percent.

Metropolis believes in paying its bills — and has taken a similar approach with buildings it owns in Chicago, Dallas, Houston and Philadelphia.

“We are 100 percent debt free across our office portfolio,” Dempsey said. “We believe tenants will increasingly seek stable ownership such as ours, where investments in amenities continue to benefit their employees, and where they will be maintained to the highest standards during the life of their lease.”

— Dana Bartholomew