Blackstone, Paramount Get Extension on $975M Loan for One Market Plaza

Blackstone and Paramount Group, which own approximately equal stakes in San Francisco’s One Market Plaza, have secured an extension on a $975M loan backed by the 1.6M office complex.

The partners have agreed to pay down an unspecified portion of the debt in exchange for the extension on the loan, which was set to mature early next month, according to a report in the San Francisco Business Times. The length of the extension was not disclosed.

One Market Plaza encompasses three office buildings at 1 Market Street along the Embarcadero, including the 27-story Steuart Tower, the 42-story Spear Tower and a six-story retail and annex space.

Although the complex was transferred to special servicing in advance of the negotiated loan extension, the partners described the transfer as “purely a procedural step needed to effectuate a change to the term of the loan, which required approval from the special servicer.”

Blackstone and Paramount, in a joint statement provided to GlobeSt.com, stressed that the One Market complex has been outperforming other office properties in the San Francisco market.

“This property is approximately 96% occupied, has seen the most direct leasing volume of any office building in San Francisco over the past three years and has recently signed leases at rents above pre-COVID levels,” a spokesperson for the two companies said.

“Our continued belief in the strength of this trophy asset is illustrated by our decision to invest additional capital in it,” the spokesperson said. Based on recent leasing activity, One Market Plaza, which offers unobstructed view of the Bay, has been able to secure net effective rent that is 20% higher than other trophy office buildings in San Francisco.

Tenants at the complex include Citigroup, which is leasing 76K SF; Thoma Bravo, which occupies 43K SF; and GIC Real Estate, which inked a deal with 22K SF last August.

The vacancy rate in San Francisco’s battered office market set a new record in the fourth quarter, ticking up to 35.9%, a 2% jump from the previous quarter, according to preliminary data from CBRE.

Negative net absorption in the city’s office sector totaled 1.4M SF in Q4, which brings the 2023 total to a yawning deficit of 6.7M SF, the worst performance in San Francisco’s 88M SF market since the onset of the pandemic in 2020, when the city recorded negative net absorption of 9.9M SF.

Office availability, which measures all available space whether it’s vacant or not, was nearly 39% in Q4, up from 37.5% in the third quarter.