US Bank moves to foreclose on One Union Square in San Francisco

U.S. Bank has moved to seize a 42,300-square-foot luxury storefront in San Francisco’s Union Square after Ashkenazy Acquisition and Brookfield Properties failed to repay a $50 million mortgage loan.

The Minneapolis-based lender is pursuing a judicial foreclosure on One Union Square at 200-212 Stockton Street and 172-180 Geary Street, the San Francisco Business Times reported. The lawsuit seeks to place the seven-story property into receivership.

Ashkenazy and GGP, which became the retail arm of Brookfield Properties, both based in New York, bought One Union Square in 2013 for $95.8 million, or $2,265 per square foot. 

They took out a $50 million, interest-only loan as part of the deal.

But when the loan came due in October, Ashkenazy and Brookfield Properties, a unit of Toronto-based Brookfield, didn’t pay it off. The loan was then placed in special servicing, with the lender filing a notice of default this month.

An Ashkenazy spokesperson said that “all landlords are in a difficult situation” during San Francisco’s recovery. “We are in discussions with the lender towards a positive solution,” the unidentified spokesperson said in a statement.

Attorneys for U.S. Bank did not respond to a request for comment, but wrote in the complaint filed Monday the bank believes Ashkenazy and Brookfield are “financially incapable” of remedying the default.

In June, the building was 87 occupied, but some of its largest tenants, including Bulgari, Moncler and Devanlay, have leases expiring between this year and 2026. Vera Wang, which had long occupied the building’s second floor, left when its lease expired in 2022.

WeWork, which once took up a 10,000-square-foot co-working office in the building, said it would seek to terminate its lease at One Union Square as part of its Chapter 11 bankruptcy proceedings.

The Ashkenazy spokesperson described WeWork’s bankruptcy as “disruptive to the asset,” and said its office, which has not been operational for some time, has been difficult to re-lease.

Many commercial landlords are choosing to abandon their properties rather than refinance at higher interest rates or try to sell them at steep discounts.

Last month, Ashkenazy missed a payment on a $66 million loan tied to a 17,000-square-foot retail building at 1 Stockton Street in Union Square.

In June, Brookfield Properties and Paris-based Unibail-Rodamco-Westfield said they would stop making payments on a $558 million loan tied to Westfield San Francisco Centre, surrendering the half-empty mall to its lenders. The mall has gone into receivership.

During a commercial real estate crash tied to remote work, Brookfield also defaulted on $1.1 billion in mortgages tied to three office towers in Downtown Los Angeles, according to The Real Deal. Contractors there accuse Brookfield of stiffing them for $6 million in work.

The company also defaulted on a $161 million mortgage tied to office buildings in Washington, D.C, and by August had $763 million in looming defaults. A $260 million loan tied to a Brookfield mall in South Florida this month also appeared in trouble.

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