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Rialto Capital falls behind on $60M loan tied to San Mateo office tower
TPG RE Finance Trust provided the debt, later securitized into CLO
A photo illustration of Rialto Capital Management CEO Jeff Krasnoff and 2121 South El Camino Real in San Mateo (Getty, LoopNet, Rialto Capital Management)
Rialto Capital Management is late paying off a loan tied to an office building in San Mateo.
The investment firm is 30 days delinquent on a $59.9 million loan from TPG RE Finance Trust tied to Tower Plaza, according to Trepp data. The building is a roughly 130,000-square-foot office property at 2121 South El Camino Real.
Rialto Capital did not respond to a request for comment.
Rialto Capital, which also has a loan servicing arm, bought the property from Bahrain’s Investcorp for $77.3 million in 2019, according to property records filed with the county. Rialto used the TPG loan to buy the property.
TPG then securitized the loan into a collateralized loan obligation, according to Trepp and financial filings. CLOs are a pool of floating-rate loans packaged into securities for investors.
The loan on Tower Plaza had an interest rate of Libor plus 2.6 percent, according to SEC filings from TPG RE Finance Trust, and is set to expire in December 2024.
When the loan was securitized in 2021, the one-month Libor benchmark rate was less than 0.3 percent. As of Nov. 17, it was 5.4 percent.
Delinquencies can be cured before a lender officially declares a borrower in default. Given the loan is securitized, it will have to be moved into special servicing if a default occurs, where a third-party servicer will try and work out the loan on behalf of the CLO investors.
Tower Plaza is almost half empty, according to listings on LoopNet. Asking rents for office space at the building are $64.20 per square foot per year, or about $5.35 per square foot a month.
Across the San Francisco Peninsula, average monthly asking rents were $5.57 in the third quarter, according to an Avison Young report.
Many office landlords are facing pain, given the jump in interest rates over the last year and a half, and the reluctance of many tenants to sign new office leases.
In June, Swift Real Estate Partners defaulted on a $62.3 million loan tied to 55 New Montgomery Street in San Francisco’s South of Market. Bridgeton Holdings is more than 90 days delinquent on a $44 million loan tied to 995 Market Street in Downtown San Francisco.