Paramount Group and Blackstone have cut a deal to extend a $975 million loan tied to a trio of office towers in San Francisco.
The New York-based investors won a reprieve to pay off the commercial mortgage-backed securities loan for the 1.6 million-square-foot One Market Plaza at 1 Market Street, in the Financial District, the Commercial Observer reported, citing unidentified sources.
The loan was turned over to special servicing, according to remittance figures posted Friday, Jan. 12.
But the borrowers managed to secure an extension ahead of the $975 million loan’s February maturity date in return for paying down the loan amount, the sources told the Observer.
The trustee for the loan, and terms of the extension, were not immediately available.
Paramount and Blackstone are also investing an undisclosed amount of capital into the property.
“This property is approximately 96 percent occupied, has seen the most direct leasing volume of any office building in San Francisco over the past three years, and has recently signed leases at rents above pre-COVID levels,” an unidentified spokesperson for Paramount and Blackstone told the Observer. “Our continued belief in the strength of this trophy asset is illustrated by our decision to invest additional capital in it.”
The spokesperson described the special servicing transfer as a “procedural step needed to effectuate a change to the term of the loan, which required approval from the special servicer.”
One Market Plaza contains three office buildings along the Embarcadero, including the 42-story Spear Tower, the 27-story Steuart Tower with a six-story annex, and an 11-story Southern Pacific Building now known as “The Landmark,” built in 1916.
Tenants include Google, which leases 342,000 square feet, and Visa, which takes up 162,000 square feet, according to The Messenger. Recent lease deals include Capital Research, which renewed 79,000 square feet; Citigroup, which leased 76,000 square feet; Thoma Bravo, which leased 43,000 square feet; and GIC, which signed for 22,000 square feet.
Based on recent leasing activity, One Market Plaza commands rents at 20 percent higher than other trophy offices in San Francisco, according to the Observer. Elsewhere, office rents are under pressure from a citywide office vacancy rate of 35.6 percent last month.
One Market Plaza was previously owned by Morgan Stanley and Paramount Group. In 2014, Blackstone bought a 49 percent stake in the complex for $600 million.
The CMBS loan for the complex hit the special servicing watchlist in August of last year.
But a source familiar with the property told the Observer that One Market Plaza’s loan is not — nor ever has been — in default. The person said the special servicing transfer happened purely to facilitate the loan extension.
The source said properties typically remain in special servicing for at least three months following a modification, at which point the loan will be returned to the master servicing process.
In October, Blackstone was poised to surrender its 346-room Club Quarters San Francisco hotel after defaulting three years ago on a $274 million loan.
— Dana Bartholomew
Correction: The article was corrected to remove a valuation on One Market Plaza
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