Blackstone's $195 million commercial mortgage-backed securities (CMBS) loan for the office tower at 211 Main Street in San Francisco has entered special administration, but a loan modification is currently underway, Commercial Observer has learned.
The loan was split into three CMBS transactions — JPMCC 2017-JP6, DBJPM 2017-C6 and JPMCC 2017-JP7 — and was scheduled to mature this month.
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The transfer to special servicing firm Midland Loan Services is part of Blackstone's efforts to secure an extension of the loan, according to people familiar with the deal.
“This is a necessary step to effectuate the loan modification and is subject to approval by the special servicer,” a Blackstone spokesperson told CO.
Charles Schwab currently leases all 17 floors of the tower, nicknamed the Schwab Building, through April 2028, but the company announced last year that it would be reducing the building's total floor count to six due to headwinds in office demand, The Real Deal reported.
But Schwab is legally obligated to pay rent until the lease expires in 2028, so the plan to sublease the space will not affect the building's cash flow, the people said.
“The building is 100% leased to high quality tenants with high credit ratings through 2028,” a Blackstone spokesman said.
The transfer was also announced in Trepp's report on Friday.
The office building is located in San Francisco's South Financial District, adjacent to Bay Area Rapid Transit, the Ferry Building and Salesforce Park. It was built in 1973 and has a total floor area of 416,000 square feet.
Blackstone acquired the building from CIM Group in March 2017 for $293 million and obtained a CMBS loan for it that same year.
Since then, San Francisco's office market has changed dramatically, with remote and hybrid work hitting the city hard, Fortune reported, citing a Capital Economics report. West Coast cities, where rents are high, have been hit the hardest, and the situation may get worse.
Cathy Cunningham can be reached at ccunningham@commercialobserver.com