Lenders on nonprofit-owned SF building sue to foreclose after default

Lenders on 1155 Market Street, a property owned by nonprofit LightHouse for the Blind and developer Patson Companies, have sued to foreclose on the property, after the nonprofit defaulted on a $48 million loan tied to the building. 

A servicer representing a group of investors in the loan, which was packaged into a commercial mortgage-backed securities deal, said LightHouse for the Blind and Patson failed to make monthly payments and failed to cure any defaults, according to a court complaint. 

The default came after the City of San Francisco walked away from more than 100,000 square feet at the building, declining to renew the lease for another five more years. Multiple city departments had occupied the lower eight floors since 2013. LightHouse occupied the top three floors. 

The city left the building at the end of May, according to LightHouse CEO Sharon Giovinazzo. Earlier this year, she said the city “blindsided” the nonprofit, adding the exit would have an impact to the group’s operations. 

Patson holds a 10 percent stake in the building, while LightHouse holds the remaining 90 percent, Giovinazzo said. Patson founder David Harrison did not respond to a request for comment. 

The duo bought 1155 Market Street for about $70 million in 2015, records show, using the $48 million loan, which was originated by Deutsche Bank. 

The CMBS investors are preparing to file a notice of default with San Francisco County to commence non-judicial foreclosure proceedings. The investors have also asked the court to appoint Kevin Singer of Receivership Specialists as a receiver on the property, to operate the building while it goes through foreclosure proceedings. 

A last request: the CMBS investors want to be allowed to buy the property at a foreclosure sale, according to the filing.