Canyon Catalyst Funds and Rubicon Point Properties have surrendered an 85,200-square-foot office building in San Francisco’s Civic Center to their lender after defaulting on a $42 million loan.
East West Bank assumed ownership last month of the vacant six-story building at 1128 Market Street through a deed in lieu of foreclosure, the San Francisco Business Times reported.
The Pasadena-based bank had filed suit in November seeking to put the property into receivership.
Canyon Catalyst — a joint venture between the real estate arm of Los Angeles-based Canyon Partners and the California Public Employees’ Retirement System — teamed up with San Francisco-based Rubicon in 2018 to buy the office and retail building for $49 million, or $576 per square foot.
Canyon Catalyst and Rubicon Point had $33.8 million remaining on that loan, which was set to mature in 2025.
It’s not clear what the bank plans for the building.
Lenders are often hesitant to acquire and operate property, though East West could hold onto the building and attempt to lease or sell it as San Francisco’s office market improves, according to the Business Times.
The building, which includes 78,900 square feet of offices and 6,300 square feet of shops, sits empty.
The partnership between Canyon Catalyst Funds and Rubicon Point Properties began a decade ago, when they invested more than $170 million in half a dozen office properties in the Bay Area’s tech corridor.
Canyon Catalyst served as the equity partner, while Rubicon served as manager for the properties, including the building at 1128 Market. Rubicon had planned to renovate the curved white-and-gray building, built in 1982, for tech tenants, according to a marketing brochure. Upgrades were to include a new lobby, shops, paint and maybe a rooftop deck.
While Rubicon applied for permits last year, its revamp never got off the ground.
Rubicon appears to have tried leasing the entire building, starting in 2019. It was billed as a “rare full-building opportunity in the city’s most dynamic neighborhood,” according to the brochure.
Since then, The Civic Center and Mid-Market have been hurt by widespread retail and office vacancies, rising homelessness and open-air drug use, according to the Business Times.
Despite the hiccup in paying its bills in Civic Center, Rubicon late last month bought a 137,600-square-foot office building at 123 Townsend Street in South of Market for $73 million.
Ani Vartanian, co-managing partner of Rubicon, said the firm bought the building because of a rise in demand this year from office tenants — 5.5 million square feet compared to 3.5 million square feet last year.
The deal, she said, was a “comment about San Francisco and the Bay Area.”
— Dana Bartholomew
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