Vornado, Trump Org on loan watchlist for SF office tower

Both owners are current on $1.2B mortgage, but loan servicer watch could spell trouble

Vornado Realty Trust's Steven Roth and Donald Trump with 555 California Street
Vornado Realty Trust's Steven Roth and Donald Trump with 555 California Street (Getty, Vornado Realty Trust)

The fourth-tallest building in San Francisco, owned by Vornado Realty Trust and The Trump Organization, is on a loan watchlist for potential trouble.

The loan for 555 California Street, the second-largest office complex in the city, has been put on a loan servicer watchlist, the San Francisco Business Times reported, citing disclosures to bond investors.

Vornado, based in New York, is the majority owner of the 1.35-million-square-foot complex once known as Bank of America Center. The Trump Organization, also New York-based, owns 30 percent.

The owners are current on the $1.2. billion in mortgage debt secured by the 52-story building in the Financial District. But there may be trouble, as servicer watchlists indicate potential challenges threatening a borrower’s ability to stay current on a loan.

The property’s monthly debt will be $6.6 million this month and has increased 38 percent since the May 2021 loan was made, according to financial filings.

Midland Loan Services is the master servicer of the mortgage debt. Situs is the special servicer, which can help resolve issues between a lender and borrower.

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Vornado said the property, the fourth-tallest building in San Francisco, was 95 percent leased at the end of last year. Tenants include Bank of America, which renewed in 2021 before the new loan was originated, Kirkland & Ellis and Morgan Stanley.

Before landing the new loan, Vornado has tried to sell the building, and also considered buying out Trump’s stake. The property includes the tower at 555 California, a shorter building at 345 Montgomery Street and a third unidentified structure.

A California Court of Appeals panel has ruled in favor of Vornado this month over the lease Regus signed in 2019, but then terminated at 345 Montgomery Street without ever occupying the space

The office vacancy in San Francisco is nearly 28 percent, according to CBRE, which has put the city on a national watchlist for “the most empty downtown in America.”

Vornado Realty Trust’s challenges continue to show up on its balance sheet: The company wrote down the value of its real estate portfolio this month by $600 million.

— Dana Bartholomew

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