From one distress cycle to another.
An entity affiliated with Chelsea Pacific Holdings has defaulted on a $30 million loan tied to The Chancery Building, an office property at 562 Market Street in San Francisco’s Financial District, according to a notice of default filed with San Francisco County. The notice comes 15 years after Chelsea Pacific bought the building from a bankrupt investor.
Chelsea Pacific Holdings transferred the property to an affiliated entity, CPH 564, LP, in 2018. The notice of default was addressed to that entity.
The entity owed $1.5 million as of May 24 on the loan, which was provided by JPMorgan Chase Bank in 2018, according to the notice. The loan hasn’t been paid since November, according to the notice. The San Francisco Chronicle first reported the default.
JPMorgan did not respond to a request for comment.
A foreclosure sale can be scheduled on the property no earlier than Sept. 2, under California rules, though no date has been set and the default could still be cured. A representative for Chelsea Pacific said CPH 564 came to an agreement with its lender and no foreclosure will occur.
Chelsea Pacific bought the 59,100-square-foot building in 2009 for $9.2 million, records show, after the seller, Genaro Mendoza, filed for bankruptcy.
In marketing materials for the property at the time, brokerage Grubb & Ellis described the building as “well-positioned to capture the expanding number of rightsizing tenants and startups abundant in a recessionary market.”
The building dates back to the 1920s, and hosts Caffe Bianco, a longtime restaurant staple in San Francisco, on its Sutter Street facade.
Many other property owners in San Francisco have faced default in recent months, as vacancy across offices has ticked up to more than 36 percent.
Last month, Gem Realty defaulted on $47 million in loans tied to a San Francisco office complex at 222 Kearny Street, a building previously partly occupied by WeWork.
This story was updated on July 3, 2024, including to correct and clarify the name of the entity named in the notice of default.