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Paramount Group and Blackstone have sealed an extension for their commercial mortgage-backed securities (CMBS) loan on One Market Plaza in San Francisco, Commercial Observer can first report.
Remittance data posted Friday morning stated that the 1.6 million-square-foot office property’s loan had been transferred to special servicing, but sources familiar with the transfer confirmed that the borrowers have now secured an extension ahead of the $975 million loan’s February 2024 maturity date in return for paying down the loan amount. The loan’s extension terms couldn’t immediately be gleaned.
Paramount and Blackstone are also investing additional capital into the property.
With special servicing transfers proliferating in headlines recently, particularly for CMBS loans on San Francisco and New York City office buildings, the news can only be welcomed. Still—unlike several other office buildings—One Market Plaza has plenty working in its favor.
“This property is approximately 96 percent occupied, has seen the most direct leasing volume of any office building in San Francisco over the past three years, and has recently signed leases at rents above pre-COVID levels,” a spokesperson for Paramount and Blackstone told CO. “Our continued belief in the strength of this trophy asset is illustrated by our decision to invest additional capital in it.”
The spokesperson described the special servicing transfer as a “procedural step needed to effectuate a change to the term of the loan, which required approval from the special servicer.”
Located at One Market Street, the One Market Plaza office complex comprises three buildings along the Embarcadero in San Francisco’s downtown Financial District, including the 42-story Spear Tower, the 27-tory Steuart Tower and a six-story annex and retail space comprising 1.6 million square feet.
One Market Plaza was previously owned by Morgan Stanley and Paramount Group. Blackstone purchased an ownership stake in the office property in 2014 at a $1.2 billion valuation, according to Bloomberg. Today, Paramount and Blackstone split ownership of the asset approximately 50/50.
While the loan hit the special servicing watchlist in August 2023, a source familiar with the asset underscored that One Market Plaza’s loan is not, nor has it ever been, in default, and the special servicing transfer happened purely to facilitate the loan extension. They added that properties typically remain in special servicing for at least three months following a modification, at which point the loan will be returned to the master servicing process.
As the U.S. office sector continues to experience an unrelenting flight to quality, One Market Plaza is a winner in the battle, commanding rents roughly 20 percent higher than other San Francisco trophy office buildings — based on recent leasing activity — despite the city’s current, well-publicized office leasing challenges.
Further, the building’s vacancy level currently sits at around 4 percent, compared with roughly 14 percent for other trophy buildings in the city, and a 35 percent vacancy level across the broader San Francisco market.
High-profile tenants at the office complex include Google and Visa, which lease 342,000 square feet and 162,000 square feet respectively, according to The Messenger. Recent lease signings at the property include Capital Research, which renewed its 79,000-square-foot lease; a new 76,000-square-foot lease for Citigroup; a new, 43,000-square-foot lease for Thoma Bravo; and a new 22,000-square-foot lease for GIC.
The loan had topped Trepp’s list of maturing loans to watch in January, but a happy ending for this particular Golden City property is seemingly now in sight through the city’s famous fog.
Cathy Cunningham can be reached at ccunningham@commercialobserver.com
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