A joint venture between WeWork and Rhone Group has defaulted for not paying its mortgage on an office tower in San Francisco’s Financial District.
The venture launched by the coworking and private equity firms, both based in New York, defaulted on a $240 million loan for the 20-story building at 600 California Street, Bloomberg reported.
The property, owned by funds managed by a venture formed by WeWork and Rhone in 2019 to buy and oversee real estate, includes WeWork coworking offices as an anchor tenant
Spokespersons for Rhone and WeWork Capital Advisors declined to comment to Bloomberg.
Office property defaults are starting to pile up as landlords that include Pacific Investment Management’s Columbia Property Trust struggle from rising rates and seek negotiations with lenders.
San Francisco, where office vacancy has climbed to nearly 33 percent, has been strained as technology companies slash jobs and downsize or eliminate offices.
WeWork, the coworking company co-founded by Adam Neumann, reached a deal for a major restructuring last month to help reduce its debt and secure more capital commitments, according to Bloomberg.
Under its new CEO Sandeep Mathrani, the company has cut expenses as it continues to try to turn a profit.
The defaults on office properties are ratcheting up pain for lenders, with billionaire investor Warren Buffett warning this week about pending problems for banks involved in commercial real estate. The biggest U.S. banks start reporting first-quarter earnings this week.
In 2019, WeWork had 25,000 members across 26 Bay Area locations, plus a large office at Bishop Ranch in San Ramon, according to the San Francisco Business Times.
Late last month, Vornado Realty Trust and The Trump Organization asked for an extension on their loan for a 52-story office tower at 555 California Street, after it was put on a service watchlist. Their mortgage debt is $1.2 billion.
At the same time, WeWork reported it cut its net losses in half last year to $2.3 billion from the year before.
— Dana Bartholomew
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