Lone Star Funds is circling one of San Francisco’s most conspicuous office casualties — a 20-story tower once scooped up by WeWork at the peak of its expansion binge.
The Dallas-based private equity firm is in advanced talks to acquire 600 California Street, positioning Lone Star to extend its distressed-office shopping spree to the Bay Area, the Dallas Business Journal reported. Pricing details remain under wraps, and the deal hasn’t closed, however Lone Star’s interest tracks with its latest $2.7 billion opportunistic fund, raised in late 2024 to target commercial properties under lender pressure.
With about $95 billion under management, the firm has been blunt about its strategy. Lone Star recently bought a major downtown Denver tower for $132.5 million, and teamed with Miami partners on Fort Lauderdale’s Bank of America Plaza for $221 million.
“Most transactions we see and expect are from the banks facing pressure to de-lever their books,” Jerome Foulon, Lone Star’s global head of commercial real estate, told Private Equity Real Estate when the fund closed. “A lot of investors have recognized this is a Lone Star kind of market.”
Few assets fit that bill better than 600 California. A WeWork and Rhone Advisors venture bought the 359,880-square-foot tower in 2019 for about $323 million — that’s just under $900 per square foot — betting on a model that paired WeWork’s leases with ownership of its buildings. Then the pandemic gutted office demand and slashed valuations.
By spring 2023, the venture had defaulted on its $240 million loan. Lenders sued, seeking a receiver and judicial foreclosure; WeWork’s bankruptcy filing followed later that year.
A court appointed Trigild as receiver in November 2023, and lenders paused foreclosure while testing the market. Trigild hired Newmark to market the property in September of this year. The appraised value has plunged to roughly $109 million, less than a third of its 2019 price, according to CMBS data.
WeWork, which once occupied more than half the tower, eventually opted to keep its lease, but slimmed its space to about 43,000 square feet under renegotiated terms.
Distressed inventory remains deep in San Francisco, and 600 California exemplifies it. In August, JLL, which handles leasing at 600 California, was advertising more than 270,000 square feet in the building for lease, meaning the building is roughly 75 percent vacant.
— Eric Weilbacher
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