Mack Real Estate Group has put a $100 million nonperforming loan on the block, and it happens to be tied to one of downtown San Francisco’s most recognizable buildings: the Bently Reserve, the former Federal Reserve Bank at 301 Battery Street in the Financial District. The roughly 208,000-square-foot property has stumbled in its post-pandemic leasing efforts, turning what was once a blue-chip showpiece into a distressed-debt opportunity. CBRE has been tapped to market the note as would-be buyers mull whether to purchase the loan, push a foreclosure, or negotiate a deed-in-lieu to grab the keys.
According to Bisnow, Mack has enlisted CBRE to bring the $100 million nonperforming loan to investors and is pitching it squarely to the debt crowd. Local reporting cited by the marketplace indicates the note could be offered around $90 million, a level that would peg the building’s value well below its 2020 assessment. That discount is part of the draw, since the asset mixes headline-worthy architecture with plenty of question marks around near-term leasing.
The loan originates from Mack’s financing of RFR Realty’s February 2020 purchase of the property, when RFR paid about $143 million, according to The Real Deal. The timing could hardly have been worse: the deal closed just ahead of pandemic lockdowns that gutted downtown office demand, and RFR’s plans to reposition the building never fully took shape. As leasing activity dried up across much of the Financial District, the financing was left increasingly exposed.
Historic Shell, Modern Headaches
Completed in 1924, the landmark building greets Sansome Street with an entrance lined by eight 25-foot marble columns and served as the Federal Reserve Bank of San Francisco for more than sixty years, Bisnow reports. Bently Holdings bought the property in 2005 for about $46.8 million and later poured roughly $35 million into converting the former banking hall into the Bently Reserve events venue, which has since shut down. Those dramatic interior spaces keep options open for adaptive reuse, but they also tend to make renovations pricier and more complicated than a straightforward rebuild for conventional office tenants…