Toy Real Estate defaults on $19M loan tied to SF office building

Toy Real Estate Investment has defaulted on an $18.75 million loan linked to a 10-story office building in San Francisco.

An affiliate of the locally based investor led by Virginia Toy was served a notice of default after missing mortgage payments for the loan tied to the 26,800-square-foot building at 604 Mission Street, in South of Market, the San Francisco Business Times reported.

Toy assumed the loan from seller Market Real Estate Partners when it acquired the Yerba Buena property in 2018  for $29 million, or $1,080 per square foot. The loan, made by Goldman Sachs, is set to mature in January 2027.

Debt service on the $18.75 million loan is more than $100,000 a month, according to a regulatory filing in 2017 by Goldman Sachs. The Class B building, built in 1906, was renovated in 1995, according to LoopNet.

The loan was turned over to special servicing in August because of “noncompliance with cash management,” according to an autumn report by Fitch. The notice of default suggests Toy began missing payments in September.

Leases for the building’s three largest tenants expired last year, according to Fitch. The tenants are customer analytics provider Canopy Labs, software developer Codified and King Street Labs, a document creation platform acquired by Dropbox in 2022.

It wasn’t clear if those tenants extended their leases. The building’s occupancy status was not available.

The notice of default suggests Toy’s lender could move to foreclose on the property if the firm doesn’t pay its bills in the next 90 days. The firm owed $1.23 million as of Jan. 6, according to the notice of default.

Toy’s real estate holdings in San Francisco include two dozen properties, both commercial and residential. 

When the investor bought 604 Mission six years ago, Thomas Foley, a director at HFF, which brokered the sale, said San Francisco was “the best market in the country,” adding that supply and demand would continue to drive rent growth.

But a shift to remote work during the pandemic, coupled with higher interest rates, have crippled office property values and driven vacancies to a record 35.6 percent. 

Landlords of office buildings have either scrambled to come to terms with lenders, turned over buildings to lenders ahead of loan maturity dates or lost them in foreclosure.

— Dana Bartholomew

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