Appraisers cut value of One Market Plaza in San Francisco by $510M

Appraisers have slashed the value of a 1.6 million-square-foot office campus on San Francisco’s Embarcadero by more than $500 million.

The unidentified appraisers put the value of One Market Plaza at $1.25 billion, from $1.76 billion in 2016, for the premium offices at 1 Market Street, in the South Financial District, the San Francisco Business Times reported, citing undisclosed CMBS data.

The appraisal took place as building owners Paramount Group and Blackstone paid down their $975 million loan on the property to $850 million to secure a three-year extension when the loan matured in February.

The partners, both based in New York, worked out a deal to extend the loan, with an additional one-year option, in exchange for making a $125 million payment on the debt, according to the San Francisco Chronicle. Financial terms of the deal were not disclosed.

“We recently extended the loan through 2028 on attractive terms, and our continued belief in the strength of this trophy asset is illustrated by our decision to invest additional capital into it,” an unidentified spokesperson for Paramount and Blackstone said in a jointly emailed statement.

The $510 million drop in appraised value suggests lenders may see One Market Plaza, which takes up a city block near the waterfront, within the general downturn in the San Francisco office market, according to the Business Times. 

The 29 percent reduction in appraised worth also means Paramount and Blackstone could lose a chunk of their equity. Some landlords in San Francisco have had all their equity wiped out by the post-pandemic reset, and have simply walked away from their investments as a result.

A few dozen office buildings have recently sold for between $200 and $300 per square foot, a fraction of what they traded for prior to the pandemic shift to remote work which caused soaring vacancies.

One Market Plaza has two office towers with a six-story annex, and an 11-story historic building known as The Landmark. 

The three buildings are 92.5 percent occupied, with rents upward of $100 per square foot, about 20 percent higher than other trophy offices in the city, according to the Chronicle. It was 96 percent occupied early this year, according to Paramount and Blackstone.

Some 21 of One Market Plaza’s tenants have leases that expire before 2026, according to an analysis from S&P Global, which rates CMBS loans. Those tenants lease 62 percent of the campus. They include Google, Visa, Morgan Lewis & Bockius and Autodesk, which together lease half the office space.

A year ago, Visa listed its 190,000-square-foot former office at One Market for sublease as part of its headquarters relocation to Mission Bay.

This month, Google announced it would vacate its 342,000-square-foot office inside the plaza’s 42-story Spear Tower when its lease ends in April.

The South Financial District had an office vacancy of 32.5 percent in the first quarter, according to CBRE. 

— Dana Bartholomew

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