A lender has listed a loan backed by a 379,300-square-foot office building in San Francisco owned by Paramount Group, allowing it to be grabbed for around $375 per square foot.
Canada Life Assurance put the $187.5 million loan secured by the 25-story tower at 55 Second Street on the market in the mid- to high-$300-per-square-foot range, or $130 million to $145 million, the San Francisco Business Times reported, citing unidentified sources.
New York-based Paramount took out the loan from Canada Life in 2019. A few months ago, the real estate investment trust wrote its investment to zero, suggesting its worth had dropped below the value of the debt. Newmark holds the listing for the KPMG Building, built in 2002.
The $187.5 million loan matures in October 2026, when tenants are poised to vacate 170,000 square feet of offices, leaving the Financial District building more than half empty.
In November 2026, consulting firm KPMG will clear out of 140,000-square-foot offices in the building in a move to 505 Howard Street. Rippling will also jump ship from 30,000 square feet of offices to a new hub at 430 California Street.
The exits could nuke a Paramount effort to refinance any maturing debt backed by the building, according to the Business Times.
In 2019, Paramount bought a 44.1 percent stake in the building in a deal that valued the offices at $408 million, or $1,054 per square foot. Its joint venture partner was not identified.
Paramount also bought two other office buildings in San Francisco in the year prior to the pandemic.
It acquired a 293,000-square-foot structure at 111 Sutter Street for $227 million, or $775 per square foot, followed by the 745,000-square-foot Market Center complex at 555 and 575 Market Street for $722 million, or $969 per square foot.
Paramount wrote both investments to zero in 2023 and 2022, respectively, then told investors early last year neither property would likely remain in its portfolio, according to the Business Times.
In January, locally based Flynn Properties bought the troubled $416.5 million loan debt backed by Market Center. The sale of the $416.5 million loan allowed Flynn to take control of the former Chevron headquarters for around $230 per square foot, or $171.4 million.
Early this week, Paramount’s stock was trading under $4 per share, down 20 percent year to date.
In recent regulatory filings, the REIT revealed it had shuttled millions in undisclosed payments to outside companies owned by its CEO, Albert Behler, and his spouse, putting it in the crosshairs of regulators and investors. It also paid Behler at least $4 million for personal expenses and business interests.
Paramount, which owns 14 million square feet of offices in New York and San Francisco, has been under fire from shareholders.
Top Paramount executives earn disproportionately high pay packages related to returns and relative to other companies, according to a recent Green Street report, which called Paramount “one of the worst performing office REITs over many time periods.”
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