Harvest Properties, Lone Star Funds Recap 600 California

WeWork’s former headquarters building at 600 California Street is poised for repositioning under Harvest Properties and Lone Star Funds’ watch.

San Francisco-based Harvest Properties and a Lone Star affiliate formed a joint venture to recapitalize the 20-story office building in the Financial District, Commercial Property Executive reported. The effort marks the second major makeover for the 37-year-old building after it was renovated in 2006.

The joint venture will renovate the 360,000-square-foot building’s lobby and plaza, build a roof deck and add a shared amenity floor with a fitness center, tenant lounge and flexible meeting spaces. Financial terms of the deal and renovation costs were not disclosed.

Dallas-based Lone Star Funds paid $130 million in January for a nonperforming $240 million commercial mortgage-backed securities loan tied to the building from Goldman Sachs.

Lone Star acquired the property outright last month with a $216 million credit bid. San Francisco-based Harvest has an equity interest in the building and will serve as operating partner overseeing leasing and day-to-day management.

The building is mostly vacant, with more than 246,000 square feet available. WeWork is the largest tenant, with 90,000 square feet.

The building last traded in 2019, when WeWork’s WeWork Capital Advisors investment arm and Rhone Group acquired it from Multi-Employer Property Trust for $330 million. WeWork stopped paying rent on its space in early 2023, and the loan landed on a servicer watchlist that same year. By 2024, the building was appraised at $109 million, nearly 70 percent below its prior valuation of $320 million in 2019 when it last changed hands.

That reset left an opening for Harvest and Lone Star to swoop in as the market started showing signs of life after a post-pandemic slump.

A bounceback in the local office market is underway.

Office vacancy across the city was 28.7 percent at the end of the first quarter, but San Francisco registered its largest quarterly net occupancy gain in more than six years with 1.4 million square feet, according to Colliers. That marked the third straight quarter of positive net absorption for the first time since 2018.

Leasing activity in the first quarter reached 3.5 million square feet, the market’s best performance since 2000. Artificial intelligence firms, including giants like OpenAI, Anthropic and Databricks, have been credited with driving office demand, as well as increasing apartment rents and home prices.

— Chris Malone Méndez