Swift surrenders San Francisco industrial building to lender

Swift Real Estate Partners has surrendered a 72,000-square-foot industrial building in San Francisco to its lender after plans to convert it into life science labs didn’t work out.

The locally based investor, which owed $31 million for the building, handed its keys to BMO Bank in a deed-in-lieu of foreclosure for 101 Utah Street, in Showplace Square, the San Francisco Business Times reported.

Swift bought the half-empty building that contained the San Francisco Jewelry Center in 2018 for $21 million, or $292 per square foot.

When it surrendered the single-story building to BMO, it owed $31 million on a loan tied to the property. Swift was never served a notice of default on its loan.

The deal comes a year after a lender foreclosed on a 100,200-square-foot office building at 55 New Montgomery Street in the Financial District where Swift defaulted on a $62.3 million loan.

The investment firm led by Christopher Peatross bought both buildings six years ago at the height of the commercial real estate market in San Francisco.

Swift planned to remake both properties, telling the Business Times in 2018 it wanted to turn 101 Utah into a “modern workspace.” In early 2022, it scored a $47.6 million loan to revamp the building into life science laboratories.

Since then, demand for research labs has waned. In the second quarter ending in June, the  Bay Area’s 41.5 million-square-foot life sciences market was 24.6 percent vacant, according to CBRE. In San Francisco’s 1.4 million square feet of labs, the vacancy was 56.3 percent.

The $47.6 million loan, made by Bank of the West, was last year acquired by BMO. It had a maturity date of five years.

It’s not clear if Swift ever made the life science conversion. While a marketing brochure said it would be done by March, building permit records for the conversion don’t  list the job as complete. 

But with the building vacant at 101 Utah and the landlord facing higher construction costs in a cooling life sciences market, Swift may have calculated it was best to walk away ahead of the loan maturity, according to the Business Times.

While the firm didn’t pay its bills for some real estate, it poured money into other properties.

Last month, Swift bought an 81,000-square-foot office building in Stanford Research Park at 3495 Deer Creek Road in Palo Alto for $56 million, or $690 per square foot. 

A month earlier, the firm bought a 180,600-square-foot office building with ground-floor shops at 200 Rollins Road in Millbrae for $47.7 million, or $264 per square foot.

— Dana Bartholomew

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