A former San Francisco WeWork building has seen its property value slashed by about 66%, according to Trepp.
The building at 25 Taylor St. a revamped multi-floor brick space in San Francisco’s theater district, was once almost entirely leased to WeWork, the formerly high-flying co-working startup co-founded by Adam Neumann.
The building was valued at $28.1 million in 2014, when it was last financed by Wall Street in the commercial mortgage-backed securities market, but a new appraisal pegged its value at only $9.5 million, according to Trepp, a platform that tracks commercial real-estate data.
Office buildings have become an increasing source of worry since the pandemic gave rise to remote and flexible work arrangements. Adding to the sector’s woes, about $1 trillion of commercial real-estate loans are coming due through 2024, at much higher interest rates and as credit becomes more scarce.
The former San Francisco WeWork at 25 Taylor St. has been mostly empty for years, except for a dentist tenant, and the building is up for sale, according to a person with direct knowledge of the situation. Co-working tenants have made past inquires, but without reaching a deal.
Private-equity investor Scott Plank took out a $18.5 million mortgage on the building in 2014 when the cash-burning WeWork had leased all but 3% of the space, according to public documents. The loan was pooled into a $910.5 million commercial mortgage bond deal, which was then sold to investors. A call to Plank for comment wasn’t returned.
The borrower’s last payment was in December on the loan, which has about $17.4 million outstanding, according to Trepp. Public documents show the mortgage was originated at a 4.5% fixed rate and matures next year. WeWork’s lease was set to expire in 2027.
WeWork
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began backing away from some of its $47.2 billion in leases in 2019, after its first attempt at going public was shelved. It began trading as a public company in 2021 and in March disclosed plans to restructure its debt. The company didn’t immediately respond to a request for comment.
San Francisco has been hit particularly hard by the pandemic and from layoffs in the technology sector. San Francisco’s office vacancy rate recently hit a record of about 30%, according to CBRE, a commercial real-estate firm.
Several major office landlords have defaulted on their debt this year, with more expected.
This post was originally published on Market Watch
