San Francisco’s Highest-Profile Buildings Set to Plunge in Value, Putting City at Further Risk

Boosted by the tech boom and new construction, San Francisco’s property value hit a record $282 billion in 2019, with property tax revenue surging 32% from three years prior. But in the years since, the top properties supporting the city’s financial growth are facing steep challenges — with the potential to demolish both the city’s former success and overall stability. 

Consider that new developments were responsible for 51% of the city’s financial growth, according to a report by the city's Office of the Assessor-Recorder. The $3.3 billion in property tax revenue and $368 million in transfer tax dollars primarily went toward city services and education.

But that is all changing rapidly: the Institute on Taxation and Economic Policy projects a 27% to 43% decrease for San Francisco’s commercial real estate prices. What's more, as a result of the work-from-home revolution, the city’s office vacancy rate has climbed to 34%, according to commercial brokerage CBRE.

And looming are future reassessments of some of the city's most valuable office buildings.

Even if all office properties were reassessed at the same time, at the current tax rate, property tax revenue for downtown properties alone would fall between $186 million and $297 million annually, according to the Budget and Legislative Analyst’s Office.

The Messenger has compiled a list, and profiles, for some of San Francisco's once most valuable — and now troubled — properties:

Salesforce Tower

Address: 415 Mission Street

Current Value: $1.33 billion

Size: 1.4 million square feet

Built in 2018 for $1.1 billion by Boston Properties and Hines, 415 Mission Street is the namesake building of Salesforce and the tallest building west of Chicago. In 2019, Hines abandoned the building, selling its 5% stake to Boston Properties and giving the real estate investment trust full control. 

As part of Salesforce’s real estate consolidation, it has pulled out of 125,000 square feet — six floors — in the tower. It previously occupied 875,000 square feet. But that tower isn’t alone. Salesforce is also vacating all of its 104,000 square feet in the 30-story 350 Mission Street across the street, in addition to other offices. 

555 California Street

Value: $1.01 billion

Size: 1.8 million square feet

Formerly known as the Bank of America Center, 555 California Street is famous for its shared ownership by Vornado Realty Trust and the Trump Organization. In April, credit ratings firm Fitch Ratings changed its outlook for the property from stable to negative, citing weakening market conditions. 

As of the third quarter of 2022 the building was 93% occupied with a debt service coverage ratio (DSCR) — a key metric for determining borrower eligibility for a CMBS loan — of 2.12x, according to loan reports made available by Bloomberg. The loan was underwritten at 93% occupied and 3.60x DSCR. 

The property was added to a watchlist by loan servicers in February. The developers requested a loan extension, which was under review as of May, according to Bloomberg reports. 

101 California Street

Value: $984 million

Size: 1.2 million square feet

In 2021, Chime signed the city’s biggest lease of the year at 101 California Street. Just one year later, the fintech firm listed two of the six floors on the sublease market. It never occupied the floors, according to CoStar.

As of June 30, the building was 76% occupied, according to Bloomberg documents.

In September, Hines, which owns a 8% stake in the property, announced that the building has undergone a renovation, adding amenities and revamping its lobby and  outdoor plaza. 

The sovereign wealth fund for Singapore GIC bought a 92% stake in the 48-story building in 2012, when the property was reportedly 95% occupied, including by Bank of America, the Blackstone Group and Morgan Stanley.

Hines San Francisco City Head George Clever said in a statement at the time that he hopes the renovation will draw tenants’ employees back to the office.

One Market Plaza

Value: $834 million

Size: 1.6 million square feet

Co-owned by Blackstone and Paramount Group, the three-building office complex was added to a watchlist in August due to the upcoming maturity of its loan in February of next year, according to loan reports provided by Bloomberg. There are no extension options for the loan. The master servicer of the loan reached out again for an update this month on maturity plans but has not yet heard back, according to commentary recently filed on Bloomberg.

Major tenants include Google, with 342,000 square feet, Visa, with 162,000 square feet and law firm Morgan Lewis & Bockius, with 151,000 square feet.

“One Market Plaza is a high-quality, trophy office asset that is approximately 95% leased and has seen more leasing activity since the onset of COVID than any other major office campus in San Francisco,” a spokesperson for One Market Plaza said in an emailed statement.

Citi and Capital Research both renewed 76,000 square foot leases each. Private equity firm Thoma Bravo, real estate firm GIC and life science investor Novo Holdings also signed new leases recently.

50 Fremont Street

Value: $689.3 million

Size: 817,000 square feet

Another building named for its lease with the software company, 50 Fremont Street is also dubbed Salesforce West. However, last year, it was reported that the tech giant would put nearly half of the building’s total space on the market. Marketing materials by brokerage Cushman & Wakefield still bear the departed tenant’s name.

The Exchange/Icona

Address: 1800 Owens Street

Value: $558.1 million

Size: 750,000 square feet

In March 2021, KKR bought The Exchange from Kilroy Realty for $1 billion, with plans to operate it with life science developer Longfellow Real Estate Partners. Dropbox had snapped up the vast majority of the building — 736,000 square feet — in 2017 for its headquarters.

An Oct. 17 public filing states that Dropbox would surrender 165,000 square feet of office space and pay an aggregate of $79.0 million in termination payments by the first quarter of 2025. However, marketing materials by CBRE show that 425,000 square feet of space is available immediately for lease, which includes additional space for sublease. The developer had hoped to bring in more life science tenants since its previous rebranding of the building to Icona: Labs at Mission Bay. KKR declined to comment.