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Commercial
San Francisco

Lenders sue to foreclose on SF office building owned by WeWork

Co-working firm defaulted on $240M loan tied to 600 California Street

WeWork Interim CEO David Tolley and 600 California Street, San Francisco
WeWork Interim CEO David Tolley and 600 California Street, San Francisco (LinkedIn, Loopnet)

Lenders are poised to foreclose on a 20-story office tower in San Francisco’s Financial District owned by an affiliate of WeWork, which occupies half the building.

A special servicer has sued the New York-based WeWork Capital Advisors to foreclose on 600 California Street after the co-working firm fell behind on a $240 million loan, the San Francisco Business Times reported.

Torchlight Loan Services, a special servicer based in New York, sued the co-working company’s investment arm that owns stakes in buildings where WeWork leases offices.

The lawsuit was filed on behalf of San Francisco-based Wells Fargo Bank, the trustee for holders of the loan. 

The suit seeks to force payment of the debt, which now comes to $250 million with interest, taxes and foreclosure costs. It also seeks a court order to appoint a receiver for the property’s sale. 

Goldman Sachs Bank USA lent WeWork Capital Advisors $140 million in 2019, and Citi Real Estate Funding lent another $100 million. Both lenders are based in New York.

Wells Fargo attorney Ron Oliner said that his client is “obviously open to resolution of the default.”

“We filed a lawsuit to pursue legal remedies, but we’re hoping for a different kind of resolution,” he told the Business Times.

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WeWork leases more than 186,000 square feet at the 359,000-square-foot building, but stopped paying rent in March, resulting in a default, according to disclosures to bond investors affiliated with the commercial mortgage-backed securities loan filed last month.

The lenders and the WeWork affiliate known as WeCap are working to renegotiate the loan, according to the filing. WeWork’s lease expires in 2025.

Other tenants include Cardenia Real Estate, which occupies about 41,000 square feet;  Audentes Therapeutics; Bridge Housing and International Training and Exchange.

The potential foreclosure is the latest Downtown San Francisco default as owners, facing higher interest rates and office vacancies in the era of remote work, fail to make payments as loans mature. 

Last month, Swift Real Estate Partners defaulted on a $62.3 million loan tied to an eight-story building at 55 New Montgomery Street.

New York-based Columbia Property Trust defaulted on a $1.7 billion loan backed by a seven-building portfolio, including two office buildings at 650 California Street and 201 California Street.

Nearly $2 billion in loans are coming due this year for office buildings in the city, followed by nearly another $2 billion next year, signaling other possible defaults, according to Trepp.

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WeWork
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ForeclosureLoan defaultOffice Market