San Francisco Office Loan Default Grows for Columbia

Columbia Property Trust has defaulted again on a $1.7B loan tied to seven major office assets, including 650 California in San Francisco.
The outstanding loan balance has risen to over $1.9B, and lenders may pursue foreclosure if not resolved.
The portfolio has seen its value drop sharply, from $2.27B in 2021 to $1.25B.
Recent lease extensions lifted 650 California’s occupancy to 90% in July 2024.

Key Takeaways

Portfolio Faces New Default

Bisnow reports that San Francisco office owner Columbia Property Trust is dealing with renewed loan distress. The company has received a fresh notice of default on a $1.7B loan backed by seven high-profile office properties across the US, including 650 California St. in San Francisco. The debt matured in July 2025 after a previous default and short-term extension, with lenders including Goldman Sachs, Citigroup, and Deutsche Bank asserting non-repayment.

Lenders Signal Foreclosure Option

The outstanding balance on the office loan has climbed past $1.9B following the missed payment. Lenders have issued required notices to CMBS bondholders and are in discussions with Columbia Property Trust about alternatives. However, they have also indicated foreclosure is possible if the debt isn’t resolved soon. As of late December, no new default notices were reported for the other six assets in the portfolio.

Asset Performance and Value Slides

The portfolio, which spans markets including Manhattan, Boston, Jersey City, and San Francisco’s Financial District, has encountered significant valuation declines. Overall, the assets’ value dropped from $2.27B at acquisition to $1.25B in recent appraisals. Despite securing 79KSF of new leases at 650 California earlier in 2024 and raising occupancy to 90%, the property’s appraised value fell from $790M in 2021 to $350M. This steep decline has coincided with increased investor interest in distressed San Francisco office assets, as buyers look to capitalize on sharp price reductions across the city’s struggling commercial real estate sector.

What’s Next for San Francisco Office Assets

Columbia Property Trust originally defaulted on the loan in January 2023 and negotiated an extension through July 2025. With lenders contemplating foreclosure and values under pressure, the fate of high-profile San Francisco office assets and the rest of the multi-market portfolio hinges on further negotiations or restructuring.