Wolf Street | May 9, 2023
Union Bank made a deal to sell its tower at 75% off original listing price, setting the first new benchmark. Other towers waiting in the wings.
We have been tracking what older office towers, many of them from the 1980s and 1990s, are worth when they finally do sell, either in a foreclosure auction or in a regular transaction. Two towers in Houston sold at a foreclosure auction at a price where the lenders – holders of Commercial Mortgage-Backed Securities (CMB) – lost 80% and 88% respectively. In the foreclosure sale of the vacant 46-story 1980s “One AT&T Center” in downtown St. Louis, CMBS holders took a 100% loss.
Foreclosure sales are brutal, and these are among the extremes. Regular sales are a little less brutal, and we’ve documented a bunch where investors in CRE debt have taken losses in the range of 35% to 50%.
These losses on CRE debt are on top of the equity losses that landlords took. So far with big losses on office debt, it has been investors that were on the hook and not banks.
Now we have the first sale in the new-era of working-from-home and office-downsizing in San Francisco, which has surpassed Houston and Dallas as the worst major office market in the US. There are a number of office towers on the market. One of them, the headquarters of Union Bank at 350 California Street in the Financial District, has found a buyer.
Allow the tent dwellers to move into the relics of formally legitimate corporate towers to at least free up sidewalks & public spaces for the kind that know to earn their living.