Flynn Properties is poised to buy a troubled $416.5 million mortgage loan that would allow it to take control of a 745,000-square-foot office complex in San Francisco.
The locally based investor is in talks with lender Amsterdam ING to acquire the loan secured by two office towers at Market Center at 555 and 575 Market Street, in South of Market, the San Francisco Business Times reported, citing unidentified sources.
The sale of the $416.5 million loan would allow Flynn to ultimately own the former headquarters for Chevron for around $230 per square foot, or $171.4 million.
If Flynn and the lender can agree on terms, the sale would mark the single largest office deal in San Francisco since the pandemic, according to the newspaper.
A loan purchase would allow Flynn to own Market Center through foreclosure, or by a deed-in-lieu of foreclosure with New York-based Paramount Group, which defaulted on the $416.5 million loan this summer.
Paramount’s lenders, led by Amsterdam ING, considered selling the debt this fall, tapping Eastdil Secured to help with the sale. A deal has not been finalized. The loan had other suitors, including Houston-based Hines, and former landlords DivcoWest and Blackstone.
Paramount and an unidentified partner bought Market Center in 2019 for $722 million, or $969 per square foot. In late 2023, the real estate investment trust wrote its investment down to zero, telling analysts last year that its value had sunk below the value of the debt used to acquire it.
Market Center, once known as Chevron Towers, includes a 22-story tower built in 1964 at 555 market, and a 40-story tower built in 1975 at 575 Market. The Class A buildings, sheathed in terra cotta, flank a landscaped plaza.
Vacancy at the two towers was expected to hit 60 percent in December.
It’s not clear how Flynn intends to pay for its pending acquisition. CEO Greg Flynn declined to comment to the Business Times.
Flynn could bring in a capital partner — likely a deep-pocketed group to help provide the requisite amount of equity to close the deal, according to the newspaper. Or it could obtain money from a larger group of investors.
In August, it partnered with Ellis Partners to buy a 108,800-square-foot office building at 631 Howard Street for $36.4 million, or $334 per square foot.
While Flynn has picked up distressed properties in San Francisco, the company and Chicago-based Gem Realty Capital defaulted on two office buildings in November whose appraised value dropped 76 percent in five years at 222 Kearny Street and 180 Sutter Street.
Flynn Properties, founded in 1994, owns more than 3 million square feet of tech office buildings on the West Coast, plus 114 hotels in 29 states, as well as two luxury resorts in Mexico, according to its website.
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