The Swig Co. Secures $190M for San Francisco Office Refi

The Swig Co. secured $190 million to refinance a 271,000-square-foot class-A office building in the SOMA neighborhood of San Francisco. The investor secured a seven-year fixed-rate loan through the Bank of China.

Located at 633 Folsom St., the building is fully leased and serves as the headquarters for Asana, a workplace management company. The Swig Co. completed significant capital improvements earlier this year, which included the addition of five floors, new building systems, a new exterior and an outdoor plaza. The building is located near local public transportation and Interstates 80 and 280.

The investor refinanced into a long-term loan from the construction financing that it secured three years ago. The JLL Capital Markets debt team senior managing director Bruce Ganong, associate Lillian Roos and analyst Spencer Bergthold secured the funding on behalf of the borrower.

The San Francisco office market has had a challenging year. During the pandemic, office leasing activity came to a grinding halt and many companies dumped large amounts of space into the sublease market. As a result, San Francisco County had one of the largest sublease markets in the country. A report from Cushman & Wakefield analyzing sublease stock throughout the country shows San Francisco is second only to Manhattan in recording the largest square footage growth in sublease space last year, increasing a staggering 587% in 2020 compared to 2019. The supply now represents 51.8% of the overall office vacancy rate in the market.

However, the market has already started to recover. For the second consecutive quarter since the pandemic started, office leasing volume has exceeded 1 million square feet. In the third quarter, 2 million square feet was leased in the market, a 74% increase over the second quarter when leasing volume also surpassed 1 million square feet, according to research from Savills. The North and South Financial Districts saw the most leasing activity, accounting for 1.3 million square feet of leasing activity in the third quarter.

Large companies have been driving leasing activity in the market. The leases by these major companies are encouraging, considering that remote work policies are still in effect and many companies have delayed plans to return to the office due to the Delta variant. This could be sign that offices are going to be a part of future workplace strategy.

The Swig Co. completed construction on 633 Folsom St. earlier this year and has full occupancy, illustrating the strength of the asset even amid some market disruption.