Mid-Market Office Floors Sold at Foreclosure Auction

CW Capital Asset Management has seized ownership of a Mid-Market office building once home to City of San Francisco offices.

An affiliate of the Washington, D.C.-based firm acquired the bottom eight floors of 1155 Market Street at a foreclosure auction for $4 million, the San Francisco Business Times reported. CW was appointed as special servicer for the $48 million loan tied to the lower eight floors of the 11-story building.

The $48 million loan backed by the portion of 1155 Market moved to special servicing ahead of “imminent default” in March 2024, per Morningstar data cited by the Business Times. In late 2023, the San Francisco Board of Supervisors failed to pass a resolution extending the city’s lease at 1155 Market, citing cheaper rents available elsewhere in the Mid-Market area. The Mayor’s Office of Disability, the Department of the Environment and the Office of the Treasurer & Tax Collector had offices there prior to the city’s decision not to renew; those agencies have since moved to separate offices across the city. Lenders received a notice of default for the debt in June 2024 and sued to foreclose that same month.

The foreclosure at the building could enable CW to find a new investor or owner for the eight-story portion, though the split nature of ownership at the building could drive away some prospective buyers, according to the Business Times.

San Francisco-based nonprofit LightHouse for the Blind acquired a 90 percent stake in the lower eight floors of 1155 Market from investor Patson Companies, which retained the remaining 10 percent stake, in late 2015. That deal also included LightHouse for the Blind’s acquisition of the top three floors for its headquarters.

The top three floors of the building are not linked to the $48 million loan and are still under LightHouse’s ownership. The portion of the building now under CW’s control also includes a subterranean parking garage, the building’s roof and the land underneath the building.

The lower eight floors of 1155 Market were valued at $80 million in 2015, according to the Business Times. Its value plummeted to $8.5 million after its most recent appraisal last October.

The outstanding debt on the eight-story portion at the time of the foreclosure auction was almost $65 million. Those floors were 100 percent vacant as of the end of last year, though the receiver has reportedly been negotiating leases that would bring occupancy up to roughly 30 percent.

— Chris Malone Méndez