Prime Finance Buys Clint Reilly’s San Francisco Office Debt

Local media magnate Clint Reilly found a buyer for the debt tied to a downtown San Francisco office building.

An affiliate of San Francisco-based Prime Finance acquired a $62.3 million loan tied to 235 Pine Street from American Home Assurance Company, the San Francisco Business Times reported. The exact price Prime paid for the loan wasn’t disclosed, though the seller might have let it go at a discount given that the debt matures next summer and will need to be refinanced or repaid then, a source told the outlet.

In buying the debt, Prime Finance positioned the property to stay in the hands of Reilly, owner of the San Francisco Examiner and a portfolio of mostly historic commercial properties in San Francisco. Reilly, also a political strategist, was adamant about keeping the building in his portfolio.

He was caught off guard when American Home, a subsidiary of American International Group, listed the loan for sale in June. He purchased the building in 2018 for $128 million. That comes to $778 per square foot for the $164,500 square foot building.

“I have no intention of selling this building, or letting anyone else own it,” Reilly told the outlet in June when the debt went on the market. “The issues around all of these office buildings going back to lenders — that is not what is happening here,” he said. “They’re selling the loan at a discount so they can get out of town.”

At the time, Reilly aimed to either acquire the debt himself or pay back any third-party buyer trying to take control of the building via foreclosure.

Prime will likely stay on as lender rather than try to acquire the building outright, sources told the outlet. That will put Prime in a position to foreclose should the need arise. Reilly said he plans to work with Prime to refinance the loan when it matures in June.

The slow and steady recovery of San Francisco’s office market has been marked by buildings selling for less than the value of the debt used to acquire them. That losing formula, combined with higher interest rates, has repelled cautious lenders from moving on any loan with a near-term maturity.

— Chris Malone Méndez