Jackson Square, a relative beacon in a distressed San Francisco office market, is showing signs of strain.
Roth Jackson LLC, which defaulted on a $13.6 million loan this summer linked to a 30,100-square-foot office building at 244 Jackson Street, is scrambling to find a buyer after a pending deal hit the skids, the San Francisco Business Times reported.
Unidentified lenders said the Oakland-based firm registered to father-son investors Moris and David Herscowitz had expected to sell the four-story building this month.
But the deal collapsed after the unidentified buyer tried to renegotiate terms of the deal in the 11th hour, according to a regulatory filing by lenders last month. Terms of the now-defunct deal, or efforts to renegotiate it, were not disclosed.
The limited liability company hopes to cut a deal with other prospective buyers by year’s end.
Roth Jackson is under the gun after it failed to pay off its $13.6 million loan when it matured in July.
The Herscowitz-led firm bought the building in 2018 for $33 million, or roughly $1,096 per square foot. The now vacant building was reappraised in July at $13.3 million.
The lenders are now considering putting the property into receivership, according to the filings, while recommending Colliers take on the role as receiver-manager.
Jackson Square has emerged as a postpandemic bright spot among San Francisco’s Downtown neighborhoods.
Its 2.3 million square feet of offices are 17.2 percent vacant, according to Colliers. Meanwhile, vacancy across the city has hit a record 37.3 percent, according to CBRE.
The historic district has received a boost from Michael Shvo’s $1 billion revamp of the Transamerica Pyramid; Apple designer Jony Ive’s buying spree along Montgomery Street; and Thrive Capital, which bought a 10,300-square-foot office building in May for $8.75 million, or $850 per square foot.
But Roth Jackon’s troubles cast a shadow over Jackson Square.
The Herscowitzes may consider the nearly $1,100 per square foot they paid for the 111-year-old building too much to justify keeping it.
The building, built in 1913 and renovated in 1997, maintained full occupancy from 2021 to early this year. Then its top tenants, Premier Tech and Scott Alley Associates, moved out when their leases expired. The ground-floor storefront sits empty.
— Dana Bartholomew
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