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.
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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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-6.81%
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.
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