Kivelstadt surrenders SF office building after default on $20M loan

Kivelstadt Group has surrendered a six-story, 117-year-old office building in San Francisco to a receiver after defaulting on a $19.6 million loan.

The locally based investor, led by Tom Angstadt and Nancy Kivelson, gave up the 37,000-square-foot building at 140 Second Street, in Yerba Buena, the San Francisco Business Times reported.

Kivelstadt, also known as TKG, bought the fully leased Class B building in 2014 for $28.3 million. At the same time, it took out a $19.6 million loan from Paris-based Natixis tied to the brick building constructed in 1907.

After Kivelstadt defaulted on the loan, it was turned over to a special servicer, according to a report prepared for bondholders this month. A “receiver took control” on Feb. 26, while “legal counsel has been engaged” on behalf of the lender or its special servicer, Midland Loan Services.

Wells Fargo Bank, acting on behalf of trustees for bondholders of the $19.6 million loan, sued the deed-holding affiliate of TKG in late January in San Francisco Superior Court, according to the Business Times.

The lawsuit seeks appointment of a receiver and injunctive relief for debt that rose with interest to $20.2 million after TKG stopped making payments in September, according to the filing.

The loan was not set to mature until July. But in response to several months of missed payments, lenders in December accelerated the loan — requesting payment of all remaining balance due, according to the complaint.

Last month the TKG affiliate TKG 140 Second LLC denied all of the allegations in the suit.

Since then, however, the court has appointed receiver Chris Neilson of Dallas-based Trigild IVL LLC, according to a legal filing this month, to temporarily manage the property and collateral for a defaulted loan, mitigating the risk and expense of foreclosure or bankruptcy proceedings.

San Francisco’s office vacancy rate is now a record 36.6 percent, according to CBRE, up from 4 percent in early 2020, before a pandemic shift to remote work. In the city’s distressed office market, many property owners are choosing to hand back the keys to their lenders, according to the Business Journal.

The Kivelstadt Group, headed by husband-and-wife Angstadt and Kivelson, own Sonoma’s Kivelstadt Vineyards.

In 2018, it sold a six-story, 85,200-square-foot office building at 1130 Market Street for $49 million. The buyer was Rubicon Point Properties and Canyon Catalyst Funds, a partnership between Canyon Partners and the California Public Employees’ Retirement System. 

In January, Rubicon and Canyon surrendered the building to their lender after defaulting on a $42 million loan.

— Dana Bartholomew

Read more

San Francisco

Canyon Catalyst, Rubicon surrender SF office building to lender

San Francisco

Office vacancy reaches a record 36.6% in San Francisco

San Francisco

Presidio Bay CEO plans the first “office resort” in San Francisco